What is a credit score?

You probably hear a lot about your credit score, but do you know what it is and what goes into it?

That score is a three-digit number that lenders use to determine how risky of an investment a person is. The lower the score, the greater the risk that they won't be able to pay their bills.

Generally, a credit score is calculated with a few factors:

  1. How regularly a person pays their bills on time.
  2. How much they already owe in relation to their credit limits.
  3. How long they've had all their accounts, on average.
  4. How many different kinds of accounts they have (credit cards, auto loans, student loans, etc.)
  5. How often they've applied for credit in recent months.

All of this has been proven to relate back to credit risk, and if you think you've had some difficulty in these areas - whether it's paying bills, carrying large debts, or having a limited borrowing history - it might be wise to fix these issues soon.

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