Having a good credit score can unlock many doors for you, but knowing what qualifies as a “good” or “great” credit score is the first step toward having good credit health! There are many factors that go into the calculation of your three-digit credit score, and that number is very powerful for you, financially. So, take the time to learn what a good credit score is, and find out ways to get one for yourself!
A Wide Range from Low to High
A credit score can range from 300-850, with 850 being the high end and what you want to strive for. Excellent credit is no joke, and you will find that when you are in the “excellent” range, which is generally considered to be 750-800, or “very good” (being 700-749), you will get approved for the best rates for loans, credit cards and any other types of financing, as it will be obvious to any lenders that you are going to pay your debts in full and on time. For the most part, you are highly likely to be approved for credit or a loan with a credit score of 700 or above.
A “good” credit score is considered anything in the 650-699 range, and “fair” would be 600-649. Anything below “fair” will make it challenging to obtain financing or a loan for anything, without paying exorbitant interest rates. Banks and other lenders charge higher rates, because chances are that you have the lower credit score because you have not paid something in full or made payments on time in the past and they are risking their money by lending it to you.
Determining your credit score requires a complex formula. Your credit score is affected by the amount of available credit that you have, the amount of money that you owe, how regularly you make your payments on time, whether you have ever defaulted or stopped paying on a loan or account, and the length of time that you have had the various accounts—as well as some other factors.
How to Find Out What Your Credit Score Is
Finding out what your credit score is can be a very simple process. There are many online companies that will offer you a free or very low cost credit report. Since there are three major credit score companies, Experian, TransUnion and Equifax, you want to get scores from all three whenever possible. They may vary by a considerable amount, because sometimes certain things are not reported to all three—things that may or may not be in your favor, credit-wise.
What to Do When You Discover Credit Problems
Once you get your credit report and you know where you stand, you may be shocked to discover that you have credit problems that you didn’t know about (or perhaps you didn’t realize how bad your credit actually was). Don’t despair—there are steps that you can take to improve your credit and, hopefully, get it into the range of “good” or even better before too long.
If you have never had a bankruptcy or foreclosure, then you have a better chance of repairing your credit. Those who have had serious credit problems such as those are facing bigger, longer battles—but they can still be overcome! The first thing that you need to do is carefully review your credit report and verifying that everything listed on there is accurate. Should you find that there are things on your credit report or in your credit history that are in error, you want to contact the lender listed immediately and try to correct the information.
Monitoring Your Credit Score
Once you know what your credit score is and you begin to take the steps required to improve it (basically start paying off debt, especially old or overdue debt), you want to monitor your credit score periodically to ensure it is improving. Many of the same online resources that are available to give you a low-cost or free credit report will offer you low-cost credit score monitoring, with monthly updates regarding your credit score so that you can keep careful track.
Part of being financially healthy and financially responsible means knowing what your credit score is and understanding how that affects your ability to obtain financing or credit in various situations. Striving for a terrific credit score should be a priority, whether you want to consider buying a new car, financing a large purchase (electronics, furniture, vacation, etc.), obtaining a new credit card or even making the purchase of your first home. The better your credit is, the lower your interest rate will be—and the less money you will be shelling out in interest charges over the lifetime of the loan. So take the steps now to find out exactly where you stand and start working toward a better credit score today!