What Is Considered To Be A Good Credit Score?

A good credit score is reflected by a number that reports to the lenders on how capable you are of paying for the loan within the agreed time. A credit score is a factor of consideration when you’re applying for credit cards, personal loans, auto loans, and even mortgages. Hence, a higher credit score is an added advantage when it comes to getting approved for loans with better terms such as lower rate of interest.

A credit score is arrived at by considering the details contained in the credit reports that you have from the three credit reporting agencies namely; Experian, TransUnion, and Equifax. The details that these credit bureaus use to compile your score include your payment history, your credit card balances, the length of your accounts, the types of credit accounts that you have, and the number of new accounts you have applied for. The possible value varies from 300 to 850.

Understanding How Credit Scores Are Measured

A credit score of 800 or higher is good by the standards of credit-crunching companies. Credit scores in this bracket should have no problem getting approved for credit and are likely to receive the highest credit approval rates and lowest borrowing costs. Only 1% or fewer consumers can be said to possess credit scores that are higher than 800.

It takes a long credit history that reflects proper handling of credit; this includes paying all the bills on time, the use of credit cards with little outstanding balances, lesser or no opening of new credit accounts, and having credit accounts in different categories. Loans, when the score is well off the roof, then the lenders are assured that you are capable of repaying any loan responsibly.

A good credit score is a score that is above average and is usually a score that is above 700 or at least 720.

Fico scores in the 740- 799 range are considered very good. Approximately 15% of consumers are part of this low credit score bracket. If your score is very good then you are likely to be given credit easily and also be given interest rates that are below average. You may even get some of the lowest rate offers it is possible to have as a client.

When one has a very good credit rating, this is an indicator that he or she is a good credit user hence being safe for the lender if they were to offer you credit. This means that you have had credit for a reasonable period and can handle it responsibly. The difference between an excellent score and a very good score can sometimes be determined by the number of credit years recorded in the credit history.

The next topic I examine is what people consider a good credit score.

There is agreement that credit scores that range between 670 and 739 are good. This is slightly above the average credit rating. Regarding credit score, only 18 percent of consumers have a good credit score. If your credit score is under the good label, you will probably be approved for most credit products but under less preferable terms.

Maintaining a favorable credit score ensures that when borrowing, it is easy to convince the credit facility providers that you can meet your bills and other credit obligations within the expected time. This saves the credit card company the trouble of explaining that you do not misuse credit and that you have not missed any recent payments. Average credit keeps one in the middle indicating that a borrower is an average risk for the lenders.

Who Decides What Is a Fair Credit Score

This is because credit scores between 580 and 669 are deemed to be fair. Credit score services state that about one-fifth of consumers have credit scores in this range. Credit scores refer to the rating given to borrowers by credit reporting agencies, which determines their creditworthiness and credit capacity. If you have a fair credit score, you can still apply for credit cards and loans, but expect to be charged a higher interest rate, and a lower credit limit and it may be more difficult to qualify for credit.

A credit score at par suggests that you are tagged with some high-risk factors such as low credit standing length or payment history. It implies that you have active balances which are not considered healthy where they maintain that the current debt ratio is too high relative to the total credit limit. Lenders will offer credit at a higher interest rate when you possess a fair credit rating.

Now I Know What Constitutes a Poor Credit Rating

From the foregoing, credit scores below 580 are regarded as poor. This tells the lenders that extending an offer to a candidate with a low credit score is likely to attract the high-risk segment of applicants. According to consumers’ credit rating, about 20 percent are considered ‘poor’.

If your credit rating is low, you will struggle to secure new credit products as lenders are wary of loaning money to such clients. You will also pay higher interest rates and fees, provided you get approved for the credit card. The cost of default rates is much more prohibitively expensive to lenders, especially for those with low credit scores and credit reports.

Bad credits indicate that the applicant has been slow in payment, has accounts that have been charged off, and contains collections, repossessions, foreclosure, or bankruptcy. Before a lender embarks to extend new credit, they would wish to see a recent improvement concerning any bad habits.

The articles are: ‘The Importance of a Good Credit Score’ and ‘How Your Credit Score Affects You. ’

That is why you see that your credit score plays such a huge role in various aspects of your financial life. Lastly, a higher score has the potential to save more money depending on the financial implication of the price difference. For example:

• The advantages are that higher numbers result in lower interest rates on credit cards, personal loans, and mortgages, which means money is saved. If an applicant has an excellent credit rating, compared to a poor credit rating, the applicant is likely to be very lucky to get a very good mortgage and save a lot of money.
• In most cases, service providers, conduct credit reference checks before hooking you up with a service. It must be noted that many auto insurers also rely on credit-based insurance scores in the determination of premiums. Having good credit scores is key to getting better interest rates in the market.
• Some of the candidates are rejected or accepted based on the credit scores in the assessment of the rental applicants by landlords. Another factor that home insurers factor in when determining the policy premiums is credit scores. Good credit is a force multiplier when it comes to your rates.
• Fact, credit scores and credit proficiency are often scrutinized by employers in the hiring process. Healthy credit is a potential career booster for job candidates.

It is, therefore, apparent that credit scores are not just useful when you want to borrow money, but are vital for many things in life. It alters your financial life throughout your lifetime. Monitoring the credit reports and credit scores should be done as often as you monitor your other financial status. To sum up, while monitoring for errors and changes can prove costly, they can also end up saving a lot of money if issues can be fixed in time.

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