What Qualifies as a "Good" Credit Score
Posted: Monday, January 28, 2013
A credit score is a number that potential creditors use to determine the likeliness of paying off one's debts. Every consumer with credit has a credit score which is determined based on the information reported on your credit report. A credit report is run through an algorithm that calculates several factors in a credit report to produce a score. That number can obviously change on a month-to-month basis as creditors update information on a consumer's account. While more than one scoring model exists, the FICO score is the most widely used in in the industry. A FICO score ranges from 300 to 850 and the higher the score the better.
What is a "Good" Credit Score?
The average consumer falls somewhere between 600 and 750 and anything above 700 is considered "good" credit while scores below 600 suggest you may be a credit risk and have poor credit management skills. If your score falls above 720 you will likely receive the best interest rate when applying for credit while on the contrary scores below 600 will likely award you a credit denial or an excessive interest rate.
Factors Used to Calculate Your Credit Score
The most significant factor in decreasing your credit score is late payments or your payment history. In order of importance, when calculating your credit score, credit bureaus consider payment history, amount owed, length of your positive and/negative credit history, new credit and the type of credit used. These factors are combined and weighted to determine your score. An excellent score is somewhere between 750 and 850; a good score between 700 and 749; fair between 625 and 699; poor between 550 and 624; and a bad score is 549 and below. As a rule of thumb a credit score of 700 or higher will generally earn you any credit you apply for, but may not get you the best interest rate available.
Access to Your Credit Score
Unlike your credit report, which you are entitled to one free copy annually, usually you have to purchase your credit score. You may purchase your score either through myfico or by visiting the three major credit bureaus websites. Having a good credit score can be the difference between saving thousands of dollars instead of making heightened interest payments that you would not have had to pay otherwise. If you plan on making a big purchase in the upcoming future, start now in increasing your credit score so you are able to obtain the lowest interest rates available. Tips on increasing your credit score are making sure you pay all of your bills on time, making sure your report reflects only accurate information about you, not applying for unnecessary credit and not using up all of your credit limits.
SmithMarco, P.C. has been protecting consumer rights since 2005 and handles Fair Credit Reporting Act cases. If information about you is inaccurately being reported, or if you feel that you're rights have been violated, please contact us for a free case review.