What Is Considered Good Credit Score?

A good credit score is that which gives the lending institutions a feeling of how competent you are in repaying your debts on time. The higher the score, the less risky you are viewed by lenders; one receives a better interest rate for loans in large purchases such as a house or car. But what exactly qualifies as a good score or a bad one? Here are the credit score ranges and what they portray Credit Score Ranges Credit Score Meaning Excellent 720-850 Excellent Good 690-719 Good Fair 600-689 Fair Average 560-599 Average Poor 300-559 Poor

What Is a Good Credit Score to Have?

A credit score is usually an integer value that represents a stage in a range from 300 to 850. While it is regarded as quite good by FICO if a credit score is between 740 and 800, a score above 800 is considered excellent. 720 is normally considered good while anything between 670 to 719 is considered to be fair. Here is a general overview of the credit score ranges:

800-850: Exceptional 740-799: Very Good 670-739: Good 580-669: Fair 300-579: Very Poor

Essentially, it is recommended that the credit score should be above 700 and preferably above 740 to be affiliated with most of the loans and credit cards with reasonable interest rates. Anything below 650 is considered to be a poor score as far as the loan lending agencies and institutions are concerned, and this makes it difficult to get approved for a loan.

What Information Goes into Your Credit Score?

Experian, Equifax, and TransUnion, the three biggest consumer credit bureaus that offer credit scores, employ unique algorithms to determine the figures. The 2 most popular model types are FICO and VantageScore. However, while each model differs, some common components determine your score, including:

Payment regularity (on-time/early payment and late payments)
Credit application (credit limits and the amount that a client owes on his credit cards).
Credit history length.
Credit utilization or the amount of credit used relative to the available credit (amount of loans and credit cards owned).
New credit inquiries and applications are also damaging to your scores since they are recent.

Duration of payment history is normally the most significant, contributing to 35% of a FICO score. If you fail to make the payments on the due date then, your credit score will be pulled down. Credit management also plays a major role – it is a bad idea to have cards charged to the limit and balances on the cards are also important.

Why Credit Scores Matter

Credit scores provide the lender with a brief idea of your credit history and how risky you are as a borrower. Credit scores enable creditors to forecast how prone you are towards being late in payment of credit or even defaulting on loans depending on how you have been utilizing credit.

Consumers with better credit ratings are considered as least risky and normally they are offered favorable interest rates and charges on home loans, car loans, and other loans, credit cards, etc. Some lenders also have certain thresholds for credit scores when you are eligible for credit products at all.

On the other hand, poor credit rating results in increased charges by charging higher interest rates, imposing strict loan approval conditions, and lowering lending ceilings. Therefore, it is possible to protect a considerable amount of your income over your lifetime if you can constantly check your credit score and have good credit health.

To be in the position to secure the lowest interest rates on debt products, you need to be in the very good to exceptional credit score range, this means huge savings on interest whether you are in the process of purchasing the first home or the family car.

Learn How to Check Your Credit Scores

The first thing to do is to get the latest copy of your credit score to know your position on the credit scale. Currently, there are three main credit reporting agencies, namely Equifax, Experian, and TransUnion; these agencies have their models through which they determine your score depending on the information contained in your credit report at their respective agency. Some organizations offer free reports and scores like AnnualCreditReport. com and some credit card companies.

Sometimes, you might find some differences between the scores you receive from the three bureaus; it is, therefore, important to review your report from the three. This also enables you to review reports for any errors and to check for similarities or differences between agencies.

Another way of accessing credit scores is from other third-party companies including Credit Karma and MyFICO – note that these will require you to input your data like your name, birthdate, and Social Security Number to get your scores.

Credit scores are important to have, especially when you are planning to borrow funds for the purchase of a home, a car, or any other major asset that requires the borrower to have a good credit rating.

It is possible to have a low credit score if you discover that your credit rating is below your desire; the following are ways through which you can raise your credit score. Some habits that can help boost your score over time include:

Timely paying all the bills – if you are late in payment or if there are collection actions against your bills, it will affect your score; it is advisable to use auto-pay for your bills.
Maintaining low credit utilization, specifically below 30% to ensure that the credit line is not exhausted.
Do not apply for too many credit cards at one time – recent hard credit inquiries enable a credit score to decline.
Correct errors on credit reports by disputing them.
It is advisable to pay credit accounts on time and in the right manner to have a positive credit report in the long run.

Some of the worst advice you’ll come across on the internet relates to how you can quickly repair your credit scores – the fact is that credit repair is a long and slow process that involves months of sound behaviors. As is the case with many other things in life, there are no simple solutions. One also needs to strive to have a lengthy credit history with timely payments and low credit utilization rather than seeking ways to work around this.

Credit Score Ranges

While different scoring models vary slightly, you can estimate your credit tier based on these general credit score ranges:

800-850: Exceptional Credit 740-799: Very Good 670-739: Good 580-669: Fair Under 579: Very Poor

It is recommended that one should be in the good to exceptional credit score range to secure favorable loan terms. Having proper credit creates good credit standing that is not easy to build but can be very useful when one has a good credit standing because they get to enjoy much better rates than the others. Keep a close eye on your credit reports and scores to make sure no errors can go unnoticed and address problems before they escalate.

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