What Is A Good Credit Score
Credit score is dependent on many factors like payment history, utilization, age, and type. Understanding where it comes from will help you get a good loan.
You’ve heard of this mysterious force that determines so much of your destiny, that manifests itself into what we call credit. Like most other things it boils down to a solitary number, a credit score, and also like most things it can change on a whim. Unlike other forces, however, it’s something you have complete control over, which is good if you're planning on getting a car.
Contributing factors
Your credit score is based on a few factors including:
- Payment history
- Credit utilization
- Age of credit history
- How often you apply for credit
- Type of credit - This evaluation is comprised of what type of credit accounts you have, including kinds of credit cards you have and any installments like a mortgage or car loan.
It’s calculated by two competing credit scoring companies, the veteran FICO, and newcomer VantageScore. They gather all of the aforementioned information from the three credit bureaus, Experian, Equifax and TransUnion. Generally, if your FICO or VantageScore is good, the other will be as well.
While having a “bad” or low credit score doesn’t necessarily stop you from getting credit, it may net you some consequences like higher interest rates or other requirements for getting loans, like higher down payments or even depositing money to qualify for a secured credit card.
What is a good credit score?
Finally, now that you understand where your credit score comes from, you can understand what it means.
Most scores fall under a range commonly adopted by lenders, though they can set their own standards if they want. The range is:
- 300-629: Bad credit
- 630-689: Average credit
- 690-719: Good credit
- 720+: Excellent credit
If you’re in the “bad credit” camp, don’t worry, you're not alone and there are a number of ways you can build up your credit score which include paying your bills on time and keeping the balance on your credit cards below 30%, among others.
Brian GrabianowskiAvid Formula 1 fan and motorcyclist, I enjoy chocolate chip cookie dough ice cream and long rides to the beach.