What Credit Score Is Considered Good?

A good credit score is a number that informs the lenders of the level of risk you pose to them when giving you an amount of credit. Credit scores are usually between 300 and 850 with most of them falling between 600 and 750. Higher scores on the FICO scale convey to lenders that you are of less credit risk. Anything less than 700 is considered a low credit score and this is not good news when dealing with creditors.

How Many is Good: Determining the Typical Credit Rating

Credit scores can be broken down into ranges, while a score of 670 or above is considered to be good. Information gathered and compiled by the four major credit bureaus show that most scores lie between 600 and 750. The current type of credit scoring that is commonly used is known as a FICO Score. However, other scoring models such as a VantageScore also rank credit on a par with the equate scale of 300 to 850. Here is how different credit score ranges are generally perceived:

Exceptional Credit: It is said that any score above 800 is considered to be very excellent. In this range, many lenders will consider you a very low risk, and therefore you will be able to access credit easily with a very low interest rate. You will also stand a better chance of accessing loans at competitive rates in the market or interest rates will be relatively low. It is important to note that fewer than one in five consumers get the kind of stellar credit rating that is desired.

Very Good Credit: The credit score ranging from 740 to 799 is regarded to be very good. A score in this range sends a message of the kind of credit risk lenders are dealing with since you are a very safe credit risk. Banks and other lending institutions will be willing and ready to give you the money you need and give you their best rates that have low costs of borrowing. Experian credit bureau statistics reveal that approximately one in five customers have very good credit scores.

Good Credit: Two: A credit score ranging from 670 to 739 is considered good, and a debtor has done a good job in repaying what he borrowed. If your score falls in this range, you are likely to secure most of the loans attracting reasonable interest rates from lenders. Many scores can be seen as good credit range scores. Well, this must mean that people are generally doing something right about establishing their credit histories.

A credit score is a numerical value in a three-digit range that indicates the creditworthiness of an individual.

Fair Credit Score: Bad credit scores are those from 580 to 669 which are grouped under the fair credit rating. According to Experian, roughly forty percent of consumers suffer from fair credit. If you find yourself scoring in this area, you can still be approved for this loan or rent an apartment though you will be charged slightly higher interest rates and costs of borrowing than the next credit score range of 700 and above. Lenders perceive you as a higher risk hence they set lower credit ceilings on how much money they are willing to lend to you.

Poor Credit Score: If the credit rating is below 580, then it is regarded as a poor credit rating or a bad credit rating by most credit scoring models. Those with such scores are deemed high risk by lenders if the score is considered poor. Only a fraction of the population has bad credit scores, with only one out of ten individuals. You will find it much more challenging to be approved for credit such as loans, mortgages, and credit cards. When you do qualify, you get to pay much higher interest rates and fees unlike the interest rates and fees offered by other online lenders. Credit also plays a significant role in the decision-making process since landlords may also consider poor credit records as a negative factor and reject rental applications. Some auto insurance companies may have higher charges for their insurance premiums. Some cell phone companies may also demand large deposit amounts before they can sign you up. On your credit report, missed or late payments, collections accounts, and bankruptcies will bring your score to the poor credit range very fast.

This question has perhaps one of the simplest answers out of all the questions that people ask: A credit score is calculated based on the credit report information that you provide.

The major credit scores are derived from the credit reports and all the details that are in the reports to give a summary of a three-digit number that depicts reliability and trustworthiness as far as the credit is concerned. The credit information, which is collected by Experian, Equifax, and TransUnion, is obtained from the credit reports.

It is important to understand that the FICO scoring formula was developed by Fair Isaac Corporation, which is a data analytics company. A FICO Score considers five core factors of your credit data listed from most important to least important when calculating your score:

1. The history of payment score contributes 35% of the total score. Paying your credit accounts on time whether it’s a credit card, an auto loan a mortgage, or a personal loan is always a plus. They are said to hurt the credit score and this is evidenced when one is disgraced by a late payment.
2. Compare that with the credit utilization ratio or balances owed, which is 30%. This simply determines the proportion of the credit limit that one in need of credit can be utilized. It is also important not to use it too much or else it will reduce your score. The optimal position is where the ratio is as low as possible but the organization is still sustainable.
3. Fifteen percent is the length of credit history. Generally, having old accounts with the lowest possible delinquencies is ideal, and, therefore, the longer your accounts have been open and in good standing the better.
4. New credit applications include 10%. Issuing credit cards to many people and in many numbers within a short time results in higher risk and thus, lowers the scores.
5. Mortgages and installment loans are 10% of the credit mix such as credit cards. Also, Section 2 states that having a mix of credit cards and loans for example is good for a credit score rather than having only credit cards or revolving credit.

How to Build Credibility: What Steps Can Improve a Credit Score?

Whether you are right now in the ‘bad’ credit score category or somewhere in between ‘very poor’ and ‘excellent’, it is entirely possible to improve your credit score over time. It will not transpire overnight, but if you embark on a positive score change, you can inch up the scores over months and years into a more desirable bracket. Here are effective ways to take your score to the next level:

1. Always ensure that you meet all your bills on each due date that they are due. If it is possible make automatic payments if this assists in avoiding the lateness fees and credit effects. This means that it considers the payment history of an individual as the most important factor in determining the score.
2. To save money on interest charges, reduce the amount owed on credit cards and other forms of revolving credit. This will assist reduce your credit utilization rate for a short-term credit score improvement. It is a fact that the best scorers in credit card usage are those who utilize less than 30% of the total credit limit.
3. Limit new account applications. Inquiries appear to any new account that you open on the credit reports that you have made. This means that if you make too many recent inquiries, lenders will deem you as a higher risk for credit. Do not open new credit accounts or apply for new credit at a rapid rate.
4. Sometimes, it is good to wait for time to contribute to increasing your score. This merely means that as time passes including the negative items like the payables the impact it has on your score diminishes gradually. You can note that a longer positive credit history also contributes towards increasing your score.
5. We can call creditors and resolve any inaccuracies that are in the credit report. This is unfair since mistakes can dent your score without any effort on your part to make them. Having them corrected saves you points, they are scarce and should be used wisely, to get the right answer once and for all.

The most crucial action is to always pay in full at every instance and ensure that you make the payment on or before the due date. Avoid late fees. Paying credit card balances more than the minimum due can help to avoid being caught in the trap and increasing credit card balances. Check your credit reports at least once a year for mistakes and afterward, make efforts toward the following credit step. Maintaining a check on your score as often as possible helps you to measure the effect of sound credit choices. It is reasonable to set your sight high as far as credit scores are concerned.

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