What Is a Good Credit Score?
You are probably looking around to get a loan with a good rate or trying to get approved for a credit card
or a car loan and like many others in your situation you are asking yourself
what is a good credit score? This page will help you figure out whether you have a good credit score
which would make you eligible for a sound loan, or if you need to be looking for
low credit score loans.
The truth is, whether you qualify for a lender's services or not, is largely dependant on that lender's
risk assessment of your credit, which can be based on various factors including your credit score. As varied
as that assessment can be from one lender to the other, the table below provides you with ranges of credit
scores, based on which you can decide what actions you can take to improve your credit score to a higher level.
A high credit score is unquestionably better than a low one, but ultimately every lender formulates his own standards,
especially for cash loans. Most of the time they base their judgment on the dangers or risks that may be
encountered, and the probable income that they will earn upon issuing the loan to potential clients.
The table below lists the Fico credit scores and the percentage of the U.S. population that
belong to each score bracket:
| FICO Credit Score | Percent with Score |
| 800–850 | 13% |
| 750–799 | 27% |
| 700–749 | 18% |
| 650–699 | 15% |
| 600–649 | 12% |
| 550–599 | 8% |
| 500–549 | 5% |
| 300–499 | 2% |
This national distribution chart of Fico credit scores shows that the majority of the U.S.
population has a Fico score of seven hundred or higher. Many lenders employ seven hundred or seven
hundred twenty as the cut-off point. The figures indicate the importance that consumers give to the
credit score, and how many have succeeded in achieving a desirable ranking.
Taking the steps below will help towards bringing you into the category of what lenders consider
a prime borrower, and allow you to enjoy the benefits that come from a good credit score.
How can I acquire a Good Credit Score?
If you’ve ever had your credit card application turned down or a bank loan disapproved, it is most
likely that it was due to a low credit score. You need to raise your credit score before you send in
another application. On the other hand, if you currently have a good credit score and plan to apply for
a loan, you want to increase it more so that you can get the best rates and terms possible. Here are
some steps you should take to improve your credit score:
1. Secure a copy of your credit reports: Three major credit agencies – TransUnion, Experian
and Equifax – scrutinize different data about you; get your respective credit scores from them. Since
they do not share their data, your scores are likely to differ between each agency.
The federal law gives you the right to one free credit report from each of these credit reporting agencies annually.
2. Examine your reports: Credit agencies do not usually verify the data they have received from your
creditors. You will have to do the checking yourself to make sure the information on your credit report
is correct.
Meticulously check your credit report for possible errors, such as typographical mistakes,
obsolete information, and incorrect account details.
If you have negative records, an improvement of your payment habits may be able to amend that.
Charged-off accounts and delayed payments will remain in your credit report for seven years. However,
even with the negative data present, the majority of the creditors will tend to look at a pattern of
payment rather than one-time incidents.
3. Pay statement of accounts on time: Always remember to pay every statement of account on the
due date. Paying bills behind schedule are recorded in your credit report. This may be a sign of a
negative habit, and it will certainly lower your credit score. One late payment – even if you pay on
time most of the time – will affect a good credit score.
4. Avoid bad debt: If you are having difficulty in paying your outstanding balances, get in
touch with your creditors. Discuss your account status and negotiate with them regarding payments. Appeal
for decreased monthly payments. Work with your creditors to extend due dates in order to stabilize your
monthly bills. This process may prevent your accounts from being branded as “bad debt” or delinquent accounts.
5. Avoid high outstanding amounts on your cards: Avoid keeping a high outstanding balance or debt
on your credit cards. Try to maintain those debts at the lowest level possible.
6. Credit cards are an indication of one’s credit status: Not having any credit cards in your
name may be considered a possible risk to lenders. It is convenient to have and maintain a few credit
cards that show a good credit standing. This shows that you have credibility and it will help you get a
good credit score.
7. Add credible and positive information to your credit file: In the past, you may have experienced
being denied credit because you had an inadequate credit file – too little credit information. Even if
you’ve acquired credit, maybe a number of creditors such as entertainment companies, travel agencies,
local banks, credit unions and gasoline card companies may not report the history of your credit account
to the major credit agencies.
Discuss with your credit grantors and request them to report your account’s facts and figures and
the history of your monthly payments to a major credit-reporting agency.
What can I expect if I have a Good Credit Score?
A good credit score means that you would be able to pass the standards of the lender you want to borrow
from, making you a more attractive customer in their eyes than someone with a low credit score would be.
People with good credit scores also enjoy rewards and perks that are not easily given to those whose
scores don’t make the grade, such as:
1. Better rates and terms from lenders – If you have a good credit score, credit card companies
and banks would offer you lower interest rates, longer repayment terms, and sometimes zero down payment
offers for the credit that you are applying for. You won’t even have to ask for these; they’ll be handed
to you on a silver platter.
2. Easy access to loans for your business – This is especially valuable if your credit standing
is good and you have your own company. For sole proprietorships, lenders usually look at the credit history
of the owners. Your good credit score will enable you to effortlessly get loans to expand your business.
3. Getting a better job – Employers usually look at a job candidate’s credit standing in order to
get a better picture of the person’s integrity, particularly when they are considering candidates for
hiring, promotion, reassignment, or retention. If you have a good credit score – assuming all other factors
between you and other candidates are the same – you have a good chance of getting that new job you applied
for or the promotion you are aiming for.
4. Credit card perks – A good credit score makes it very easy for credit card companies to give
you rewards such as waived annual fees, free hotel stays, and free airline mileage, among other things.
Although not convertible to cash, these rewards have a cash value – it’s like getting your money back.
5. Increased purchasing power – With a good credit score, you are able to access credit at better
terms, and this means savings for you. The money you saved from that lower interest rate and reduced
mortgage can be used to buy something else, allowing you to achieve a better lifestyle in the process.
Why is having a Good Credit Score essential?
Since recent years, the three-digit number called the credit score has become a vital aspect of every
citizen’s financial existence. Designed to project the odds or possibility that you will not be able to
pay your bills or debts, every action or decision you make affects and is in turn affected by the credit
score.
Credit agencies organize, prepare, maintain, and monitor data and statistics about your financial
activities. The information is compiled into a credit report, and that report is summed up into a single
number called your credit score.
The credit report lists your loans and credit card accounts along with corresponding balances and
payment schedules. It will also include data on unpaid bills and its penalties.
Credit scores are very useful to lenders; however, they can have massive consequences for your
financial standing and your chances of getting more credit if your score isn’t high enough to assure
lenders that you are not a credit risk.
Credit scores are used by lenders to perform the following tasks:
1. Foresee the probability that someone will act in response to a direct mail credit card
solicitation.
2. Predict which clients might close a credit card account or pay the balance down to zero.
3. Approximate how much a borrower is credible to pay, if anything, on an anomalous account.
4. Foresee the danger that a consumer may fail to pay on a particular type of account, such as
cellular phone account, a utility bill, a mortgage or an auto loan.
5. Calculate the risk of a default, such as bankruptcy
6. Compute the total amount of income to be expected by a credit card issuer on a particular account.
7. Identify and find fraud in insurance or credit applications.
Your credit report is continuously updated with new or recent data, and this new information
affects your credit score. Having a good credit score right now doesn’t guarantee that it will remain that
way perpetually; depending on your actions, it may go higher or lower. Checking your credit score on a
regular basis is an imperative practice, as it will give you an idea of your current credit standing. It
will also allow you to take the necessary steps to improve your score if you see that it isn’t something
that creditors would consider as a good lending option.
By now you should know the answer to the question what is a good credit score? and you can read
more by exploring further articles on this topic.
