Your credit score defines you. Well, not really, but sometimes it can certainly seen seem that way. Student loans, credit cards, mortgages, personal loans and even some jobs all require your credit score to determine your creditworthiness. It may seem like a small thing at first, something that you do not put much thought into but as you get older and more independent, the more that score counts!
Do you know your score?

If you do not know your score, you should. The FICO score is the standard score used to determine your credit worthiness. Your FICO credit score is used to evaluate your creditworthiness by giving you a certain amount of points based on the information contained in your credit report and your debt-to-income ratio. Not every single lender uses the FICO model; however, the models they use are very similar to it. Also, lenders vary in what is important to them in terms of loan approval. One lender might place more weight on payment history, while another places more weight on income.

• 35% – Past payment history
• 30% – Outstanding debt
• 15% – Length of credit history
• 10% – Recent credit applications
• 10% – Types of credit and loans you have

You can order your FICO credit score at any one of the three credit reporting agencies also known as credit bureaus — Experian, Equifax or Trans Union. Your credit score will vary at each of the credit bureaus since they do not have the same mix of information about you.

• 750 – 850 Excellent
• 660 – 749 Good
• 620 – 659 Fair
• 350 – 619 Poor

If your score falls between 750 – 850, congratulations! You have excellent credit. This score means you probably will be offered the lowest interest rate available provided that you do not have too much debt.
From 660 – 749, means you still have good credit and possibly will still receive low interest rates just barely above the lowest, usually by 2 – 3 points.

If your credit score falls between 620 – 659, your score is considered fair. With this credit score, it will be harder to be approved for loans and credit cards, but not impossible. Your interest rate will be substantially higher than those with excellent credit scores, meaning you will pay $200, $300 or even $400 more per month more on an average 30-year mortgage and about $100 more per month on a car loan. Additionally, if your state allows it, insurance companies can charge you substantially more, sometimes twice as much for auto and health insurance.

Then, there is the ugly. It may be a harsh reality, but those who fall in the 619 and below range have poor credit. It will be very hard, if not impossible to be approved for an unsecured loan and mortgages, auto loans and credit cards, if approved will usually require the maximum rates allowed by law. Those with poor credit are often the victim of con men and immoral companies who prey on consumers who cannot get traditional financing, charging them outrageous interest rates, fees, and such for auto loans, credit cards and payday loans.

One credit card company uses the credit score system to its fullest advantage and to the benefit of its cardholders. Capital One offers most of its cards to consumers on a tiered score basis. The cards have levels for Excellent, Good, Average and Fair credit ratings. Each offers a different maximum credit limit, finance rate and other fees. For those just starting out, with fair credit or starting over, they offer cards with lower credit limits but a higher interest rate and numerous rewards from which to choose. Capital One also rewards cardholders with lower credit scores for regular on-time payments by offering to increase credit limits and/or decrease the finance charges or other fees.

For those with better credit, Capital One offers a plethora of cards to choose from, all with larger credit limits, lower finance charges and many various rewards programs including the popular cash back type.
It is up to you.

Where your credit score currently falls is really up to you. If you are disciplined and self motivated, keeping a good credit score may be easier. For others, it may mean taking a hard look at your spending and more importantly saving habits. It is never too late to start repairing your credit. A credit score is a terrible thing to waste!

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