Your credit score is a 3 digit number based on the credit bureaus records about your credit history. The credit score is based on five different aspects of your recent credit history and current use of credit granted to you by lenders. The three major credit bureaus loosely base your credit score on a scoring method based on risk, developed by the Fair Issac Corporation (FICO).
The answer to “how do I interpret my credit score?” is not a simple answer. Your credit score can be between 300 and 900, the higher the better. Due to the recent credit and financial upheaval, lenders are requiring much higher credit scores than previously for a reasonable interest rate.
Before the trouble started, a score of 620 put you in the ballpark for being granted credit, with a small interest rate bump. If the going prime rate was 8%, you might be offered 8.5 or even 9%. At 680 you would be offered 8%, and with a credit score of 700, you might get an even better deal.
Now, most lenders have tightened their credit policies and many require a 720 or even 740 to get the best interest rate. Depending on the type of loan, other factors may come into play after your credit score ranking. Each lender may have additional requirements, like how much of a down payment, what the term of the loan may be, or even additional collateral against the loan.
But to properly interpret your credit score, you first need to understand how the credit bureaus and the lenders determine your score. It’s a two step process, the bureaus compile your recent credit history to create your credit report. Then the information in the credit report is used to arrive at your credit score.