What is a Good Credit Score

Credit scores are vitally important when it comes to purchasing homes, cars, and acquiring school loans. It is the three-digit number that determines how much of a loan we will be allowed and at what interest rate.

Stated by a Dallas credit repair expert, the better your credit score, the better your interest rate. The lower your score, the less beneficial rates you’ll be able to acquire. So what is a good score, and how do you get into range?

Credit Scoring System

The credit scoring system is completed by three major credit reporting companies: Experian, TransUnion, and Equifax.

They all use the same FICO scoring system, which awards you a point range based on several factors, including your credit history, credit utilization, length of credit history, new cards, and your total mix of credit. Points will vary slightly between the three companies, but your score shouldn’t differ more than ten or twenty points, at most.

The credit scoring system is used by lending agencies similar to a background check. Depending on your score, they can tell just by the numbers how good of a borrower you are.

Your credit score tells a lender two very important things:

–          Do you pay your bills on time?

–          Do you borrow responsibly?

Your score is heavily determined by your credit history (how well you pay down your debt), and credit utilization (how much you owe). A low score instantly communicates to lenders that they may be taking on some risk if they offer you a loan.

Your Credit Scores

Credit scores range from very poor to exceptional, with a point value assigned for each. The more responsibly you use your credit, the better your score will be over time. Each credit reporting company has a slightly different scale, but in general, you can expect the following point ranges:

300-579: Very Poor

580-669: Fair

670-739: Good

740-799: Very Good

800-850: Exceptional

The higher your credit score, the better the terms you will be offered on loan interest rates, repayment requirements, and down payment requirements. Those who fall into the “very poor” and “fair” ranges should expect significantly high interest and stringent requirements when loans are offered.

If:

You fall into a very poor rating, your loan or credit application may be denied outright.

Should your score remain in the “good” range, you can expect to be granted loans and credit, but likely with a less favorable interest rate than desired.

When you reach the “very good” and “exceptional” scoring ranges, you’ll receive the best interest rates available and receive loans of value. At the highest range, you’ll receive the best rates and offerings for loans possible, including low interest, minimum down payments, and longer payback times.

Use Credit Wisely

Your entire credit history factors into the credit score you receive from the credit reporting institutions. The more consistently you pay credit bills and loan payments, and the more responsibly you borrow, the better your credit score will be.

It takes time to build, but with steady, wise use over a long period, you should reach the “good,” “very good,” and excellent ranges with little issue. Does your score put you in good standing?

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