Yes, it’s what you have been seeking as you sift through websites with difficult to understand information, pop-ups trying to sell you your credit score, or worse yet, misinformation from an unqualified source. A credit score explanation doesn’t have to be complicated and by the time you are finished reading this article you should have an easy understanding of the definition of a credit score. First, let’s talk about the numbers. Credit reports are scored from 300-850. Everyone knows that the higher the number the better, but what is the definition of bad credit?

Generally, a bad credit score is anything below 620 points. If you have a score below that, then you are likely to get denied for loans and home mortgages. Your credit score consists of more than just your score however, it also contains information about your payment habits, how much you owe in total debt, where you work and how long you have worked there, as well as your current address, and previous addresses, and how long you lived at each. One thing to keep in mind that some of this information, especially address and job is incorrect or incomplete.

The main body of your credit report consists of current and past debts. It will include almost everything that you have ever financed including cars, homes or store merchandise as well as credit cards, whether they be normal Visa, Mastercard, Discover or credit cards that are only for a store, like a Sear’s credit card. Your credit report will hold onto positive information forever, so a loan that you took out fifteen years ago and paid off will still be on your report. Negative information however, luckily, usually has a shorter lifespan.

One common misconception is that your banking history appears on your credit report. This is not the case, your credit report does not contain banking information in nearly every case, either positive or negative. Negative bank records such as closed accounts are kept track of by a separate service known as Chexsystems. Another fact that most don’t know is that while most negative information does fall off of your report after seven years, it doesn’t always happen. The debt falls off after seven years of being closed or inactivity, so a debt that you have recently made arrangements on, even if it is seven years old, will not fall off for seven years from the time you last contacted the creditor.

A credit score explained is a number that creditors can use to decide whether or not you are too much or a risk to extend credit to. However, they also use other factors to decide. One of these is your debt to income ratio, which is how much debt you owe compared to what you earn gross. Another factor is your stability – how long you have been at the same job and how long you have lived at the same address. If you have a high income and stability you may be able to get financing, even with a lower end credit score.