What is a credit score?
A credit score is a number that is used to represent a person’s creditworthiness. It is an important factor used by credit card companies, lenders, and other financial institutions when determining whether or not to extend credit. Credit scores range from 300 to 850, with higher scores indicating a better credit risk. In Maryland, all consumers are entitled to a free annual credit report, and can purchase their credit score through nationally recognized companies such as Experian, Equifax, and TransUnion. Credit scores are based primarily on the amount of debt a person has, the payment history on that debt, and the length of time in which the debt has been open. A person’s credit utilization ratio (the percentage of debt used compared to the total available credit) also affects the credit score, as it is important to maintain a low utilization ratio. Negative items such as late payments, collections, charge-offs, and bankruptcies can also lower a person’s credit score, so it is important to keep track of these items when reviewing one’s credit report. Overall, a credit score is an important indicator of a person’s ability to repay a loan or open a new line of credit. In Maryland, it is important to understand how credit works, maintain a good credit score, and regularly review credit reports. Knowledge and responsible management of one’s credit history can help individuals make informed decisions about obtaining and using credit products.
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