What Is A Good Credit Score and How Will You Know Yours?
The credit score is one of the most influential numbers in a consumer’s life. Banks and other financial institutions use this figure to determine a person’s creditworthiness. The credit score comes from calculations that are based partly on a person’s payment history with other creditors. Banks often use consumer credit scores to make their decisions about the best loan products, credit cards, mortgages and the like. Every consumer over the age the 18 years old has a credit score, and each person will need to have a “good” credit score to obtain fair lending opportunities.
What Is a Good Credit Score?
To understand what a good credit score is, consumers must understand the standard scoring platform. Approximately 80 percent of creditors use the FICO scoring system to judge creditworthiness. FICO credit scores range from 350 to 850 points. A score of 300 points is extremely poor, and a score of 850 is perfect. The numbers 300 and 850 represent the opposite poles of the credit world. The numbers in between those two numbers signify bad credit, fair credit and good credit. A “good” credit score is one that is between 700 and 759 points. Any score that is above 759 points is considered excellent.
What Does a Good Credit Score Mean for a Consumer?
A good credit score offers several benefits to the consumer. One benefit of having a good credit score is that he or she may have access to low interest rates. Interested rates for credit cards can be as high as 29 percent for people with bad credit. Someone with good credit can get the same credit card with a 12 to 15 percent interest rate. People with good credit are likely to obtain approval on a majority of credit products they request, as well.
How to Obtain a Good Credit Score
Obtaining and maintaining a good credit score takes a strategy and strict adherence to the strategy. The two most important factors in an overall credit score are payment history and amount owed. Therefore, keeping the balances to a minimum and making timely payments on any balances owed are extremely important. A late payment can bring down a credit score drastically. Creditors like to see consumers using less than 50 percent of their balances. Therefore, if a consumer has a credit card with a $500 balance, then he or she will want to keep his or her spending under $250 to keep your score above water.
Two other ways a consumer can keep his or her credit score above water is by limiting credit inquiries and keeping credit card accounts open for as long as possible. Credit history makes up 15 percent for the overall score. A consumer who follows these tips will be able to obtain “good” credit.