What’s A Good Credit Score? That’s a great question. Your credit score, after all, is the first thing that lenders consider when deciding whether to lend you money or not. A good score enables you to get a larger loan amount at lower interest rates! However, different lenders have different definitions of what a good score is. Let’s check out the question in further detail:
Let’s begin with how you can check your credit score.
- To start, JUST because you’ve paid your bills on time does not mean that your credit score is good.
- Similarly, if you’ve paid a few bills LATE – it does not necessarily mean that your score is bad.
Although your payment history is a good indicator, you cannot assume anything – the only way to accurately determine your credit score is to check it yourself. You can do so at online websites.
However, most of these sites usually charge a small fee even though they claim that they’ll show you your score for free. Credit.com is a totally free resource – they don’t request your credit card information. Alternately, you can apply for free credit reports at annualcreditreport.com (Government Authorized website).
Your credit score is not included in the reports but you can buy it for a small fee.
There are three credit reporting agencies:
You are entitled to one free report per year from each agency (Not financial or calendar year – one report in 12 months). If you want to order your credit report via phone, simply dial 1-877-322-8228. You can order all three reports at once or at different times in a year. Remember, checking your credit score multiple times does not lower it!
Important: You’re ONLY able to request your score ONCE PER YEAR for each Agency with the above mentioned website. If you want to check your score multiple times in order to monitor your credit as you actively work to fix it – I highly recommend signing up for this service here. It’s a few bucks a month but lets you check as often as you like! This is CRUCIAL for monitoring your credit and seeing how quickly you can make improvements is definitely a good boost for your attitude.
Now that you know how to check your score, let us find out if it is good or bad.
Different agencies have slightly different methods for calculating scores. Their score range also differs.
Various scoring models and their score ranges are listed below:
- FICO Score
- A large majority of lenders use the FICO model which was introduced in 1989. The FICO score range is from 300 to 850.
- TransRisk: 100 to 900.
- Vantage Score 1.0 and 2.0: 501 to 990.
- Vantage Score 3.0: 300 to 850.
- Plus-score: 330 to 830.
- Equifax Credit score: 280 to 850.
In this article, we will talk about FICO, being the most popular.
- In general, if your FICO score is more than 750, your credit is considered to be EXCELLENT!
- If it is between 700 and 749, you have GOOD credit.
- IF your score ranges from 650 to 699, your credit is FAIR. 600 to 649 is considered as POOR
- Anything below that is just plain BAD!
Ideally, you should strive for a FICO score of more than 750 but in the real world, anything above 700 is considered good and achievable. According to many financial experts, you want to be on the better side of 720. However, all this is not set in stone. As mentioned before, various lenders have their own way of assessing risk and credit worthiness.
It’s also important to take into account that you will actually have three FICO scores – every credit bureau will rate you according to the data received by them. Usually, there are minor differences between the three scores but even these may sometimes proves to be decisive.
For example: Say Equifax rated you 695 which puts you in the FAIR range but TransUnion gave you a score of 703, which means that you have a good credit rating.
If one of your scores is way below the other two, it is possible that the agency made a mistake.
In such a case, you should try to compare reports, find out the error and bring it to the notice of the bureau. According to the law, the bureau has to investigate the matter within thirty days, unless you are making frivolous claims.
Take a look at these three examples of how different vendors work with your credit:
- One lender who has a good reputation and is in demand may be highly selective and only offer loans to those who have a FICO score of more than 750.
- Another lesser known lender might want to approve more loans (in order to generate more income) and will approve loans for people with a FICO score of 670 or more.
- Some financial institutions may lend money to those with excellent credit at lower interest rates and for those with good or fair credit; they might charge a higher interest rate in order to compensate for the risk.
Anyways now that you know that, the next step is to work towards IMPROVING your credit. For that, I suggest you check out the article below about how an ‘Average California Housewife’ improved her credit by almost 200 points in a couple months. (Yes, this really did work for her & it can for you too).