When a lender considers a loan proposal, the first thing he looks out for is the applicant's credit score and credit report. Ergo, the credit score is a large deciding factor that governs the fate of your loan application. What is a Credit Score Rating? A need was felt to create a system which could effectively evaluate the credit worthiness of an individual. That was the motivation for creation of credit score ratings. It's essentially a numerical score or grade that an individual is assigned, according to his credit history. Lenders find it to be an effective tool when analyzing loan proposals. It's mandatory for every financial institution to supply the credit details of every individual that they are serving as a customer. A large central database is created which has the credit score details of all the individuals. Credit Score System in the USA In USA, the accepted credit system is the FICO score, developed by the Fair Isaac Corporation. It is based on a statistical technique of evaluating a three digit score, using credit history data of an individual, gathered from various sources. Equifax, TransUnion and Experian are the three credit reporting agencies in the United States of America that use the FICO software to generate FICO scores of individuals based on gathered credit reports. The three different rating agencies generate three separate credit scores in actuality! Ergo, it's possible that the rating acquired from the three agencies will differ slightly. The FICO credit rating range extends from 300 to 850. People can get a report of their credit score from the website named as 'Annualcreditreport', free of charge once a year. Otherwise it needs to be purchased from the Fair Isaac Corporation. When a loan applicant has a bad credit rating, the financial institution perceives greater credit risk. That's why, a higher interest rate is imposed and collateral is demanded from such loan applicants. On the other hand, people with good credit scores can expect better terms of interest as the lender is assured of his or her creditworthiness. That's why, it is essential that one knows the ratings chart and understand the factors which affect credit rating calculation. Factors That Affect Your Score To maintain a good credit rating, a knowledge of factors affecting its calculation is a must. The main factors that decide your credit score, in descending order of importance are payment history, amount of money owed, length of credit history and new credit. These parameters decide where your score will stand in the credit report score chart. Ratings Scale The general rule is that higher the score, more is your creditworthiness and you have better chances of getting a loan at a lower interest rate. There is no absolute ranking scale that puts set limits on what is a good or bad credit score. I mean, the upper and lower limits presented in the scale below for bad score, average score and good score, may vary around a bit. However, you can consider this as a rough estimate of how your score will be perceived by lenders. Here is the ratings scale.

Credit Score	Description
730 - 850	Excellent
700 - 729	Great
670 - 699	Good
585 - 669	Average
300 - 584	Poor

If you are curious about what makes a good rating, then know that it's anything roughly above 670. Anything below 600 is generally bad news. Majority of people in the US (about 60%) fall in the credit rating range extending from 650 to 799, while the median score is around 723 according to past surveys. Credit scores are not static and they can be improved when one takes effort in clearing out his or her debt burden. With consistent debt clearance over a period of time, scores can certainly be improved.