What Is Considered Good Credit Scores and Why It Matters
Note that we have indicated plural (scores). Your credit scores are a numerical representation of your creditworthiness, and they play a significant role in your financial life.
Credit is reported to the three (3) Credit Bureaus which are: Equifax, Experian, and Transunion. These bureaus do not always report the same credit score. Different lenders, banks, and institutions often use different bureaus.
Good credit scores can help you secure loans, credit cards, and even lower interest rates. Let’s talk about what exactly is considered a good credit score, and why it matters.
Table of Contents
Understanding Credit Scores and Their Importance
Credit scores are a three-digit number that ranges from 300 to 850. The higher the score, the better your creditworthiness.
There are three main credit bureaus. When you apply for a mortgage loan, all three bureaus are pulled to evaluate your credit. The middle score of the three is how your score is determined.
Normally, banks and some other lending institutions for credit cards (revolving charges) and installment loans do not normally pull the tri-merged credit report.
What is Considered a “Good” Credit Score
Depending upon who you ask about where credit scores range, you may find different evaluations. The credit bureaus have their own ranges, from our investigations.
With my experience in lending, we determine the following:
A fair credit score ranges from 620 to 660 and a good credit score is typically considered to be 680-740, while a 740 to 800 is very good, and an excellent score is 800 or above.
Your credit score is important because it can impact your ability to get a job and be approved for loans, credit cards, homeowners insurance, and even rental applications. It can also affect the interest rates you receive, which can have a significant impact on your finances over time.
Every bank or lending institution makes its loan decisions based on an individual’s credit history, debts, and scores. Regardless of what you may have been told; the higher your score, the better deal you will get with your financing.
A good credit score is typically considered to be 700 or above as shown above. There are occasions when a 660 score may be sufficient if there are no further negatives within the credit file.
This depends upon the overall credit report analysis, and for someone who has fewer credit obligations without a lot of history showing on their credit report.
The latter is true for individuals who have maintained a history of abstaining from making debts and credit obligations. The scores are also based on total obligations and how they are paid.
When you have an excellent score of 800 or above scores, this means that you have a solid credit history and are considered a low-risk borrower.
What The Benefits of Excellent Scores
With a good high credit score, the better terms of the loan you will be offered. This means the term of the loan, the high balance (how much credit), and the interest rate (APR) for credit cards.
In fact, when your credit score is excellent, you will receive many offers from credit card agencies, and possibly other lending institutions. This means that you must remember that having lots of credit lines does not improve your credit score.
If you have 5 credit cards with balances that can make your score less favorable. It is better to have fewer credit cards and maintain them with low balances to keep your credit score high.
It’s important to maintain a good credit score because it can impact your financial health in many ways, from getting approved for a mortgage to securing a job.
Additional information about Credit Scores
How Your Credit Score Affects Your Financial Health
Your credit score is a key factor in determining your financial health. A good credit score can help you secure financing with favorable terms. However, a poor credit score can make it difficult to get approved for credit or may result in higher interest rates.
Also another factor the more credit you have, the higher your debt-to-income ratio will be. This is also a consideration in obtaining financing. Your income is evaluated before the lender will allow additional financing to your credit obligations.
It’s important to monitor your credit score regularly and take steps to improve it if necessary to maintain your financial health.
Tips for Improving Your Credit Score
Improving your credit score can take time and effort, but it’s worth it in the long run.
- One of the first steps you can take is to pay your bills on time and in full each month. This shows lenders that you are responsible and can manage your finances well.
- It is always wise to pay more than the minimum payment on credit cards if you do not pay it in full. If you are only paying the minimum payment, you may be paying close to the interest only. That is not a good way to maintain good credit practices.
- Another tip is to keep your credit utilization low, meaning you don’t use too much of your available credit.
- Finally, check your credit report regularly for errors and dispute any inaccuracies you find.
These small steps can add up to a big improvement in your credit score over time.
The Benefits of Maintaining a Good Credit Score-Summary
Maintaining good credit scores, as there are three. Equifax, Experian, and Transunion. Check them all to make sure something has not been reported to one and not all three. This can have a significant impact on your financial health and history.
Overall, a good credit score is an important factor in achieving financial stability and success.
