Consumers often wonder “what is credit?” Score yourself on our quick quiz below to determine if you know the basics like credit score range, how credit is determined, and what credit is used for. The answers may surprise you.
1. What is credit?
- How much money you are allowed to borrow.
- Your reputation as a borrower.
- The interest rate you are charged for borrowing.
- Any money you borrow and agree to pay back.
2. What is the range of the credit score scale?
3. Which of these factors goes in to determining your credit score?
- The amount of money you earn.
- The amount of available credit you are using on revolving accounts, such as credit cards.
- Whether you are married.
- All of the above.
4. Who uses your credit score to make decisions about you?
- Potential employers.
- Banks and others who are considering giving you a loan.
- Landlords making decisions about renting to you.
- All of the above.
Finished our four-question quiz, what is credit? Score yourself now to see how well you did. The answers are B, B, B, and of course, D. If you scored a perfect four of four, you certainly know something about “What is Credit.” If you scored below two, read on.
Credit is the reputation you have as a borrower. It represents the trust banks and other lenders put in you to pay back loans on time. The more trust and confidence they have in you, the better your credit.
Most companies or individuals extending credit don’t have the time to look at all the information it takes to determine credit worthiness, so they use a credit score calculated by one of the three major credit reporting bureaus. They simply ask, “What is credit score for person X” and the bureau forwards a score. The credit score scale ranges between 300 and 850, but generally a score over 700 is considered good.
Factors considered in credit scores include payment history, amount owed, length of credit history, applications for new credit, and types of credit used. These factors are assigned different weights to arrive at the answer for “what is credit score for person X.”
To some extent, your credit score measures your responsibility and integrity. For this reason, employers and potential employers, utility companies, and potential landlords all may consider your credit score when making decisions about you.
For more information about what is credit, score calculation, and ways to improve your credit score, visit us at www.scoresense.com today.