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Understanding Your Credit Rating

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On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.

Understanding Your Credit Rating
The FICO® score, developed by Fair Isaac Corporation (the pioneer in credit scoring), is a number between 300 and 850 that lenders use to determine your credit rating. A FICO® score is a snapshot of your credit rating at a particular point in time. The higher your credit score, the more likely you are to be approved for loans and receive favorable rates.

More than 70% of the 100 largest financial institutions use FICO® scores to make billions of credit decisions each year, including more than 75 percent of mortgage loan originations. 

What does the score mean? Generally, the scores equate to the following (keep in mind each lender will have their own criteria that may differ somewhat from the values shown):

  • 500-619 is considered a sub-prime score
  • 620-699 is considered a medium score
  • 700 and above is considered a good to excellent score

How are they determined? The five areas considered in the calculation of your credit score listed from most important to least important are:

  • Payment history 
  • Amount owed 
  • Length of credit history 
  • New credit 
  • Types of credit in use 

How can your score be improved? Generally, people with high scores consistently:

  • Pay bills on time 
  • Keep balances low on credit cards and other revolving credit products 
  • Apply for and open new credit accounts only as needed 

Want to check your score? 

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