Good FICO credit score. Credit repair advice for consumers and tips for improving your credit score. This article answers the question what is considered a good credit score?
FICO scores, that’s a very hot topic these days on the radio and on television, magazines and newspaper articles. But what is the credit score and how do you find out about your own credit rating?
A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each score is based on the information in your credit report.
Credit scores affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. Higher scores mean you are more likely to be approved and pay a lower interest rate on new credit.
When lenders talk about your score, they usually mean the FICO score developed by Fair Isaac Corporation. It is today’s most commonly used scoring system. FICO scores range from 300 to 850, and most people score in the 600s and 700s (higher FICO scores are better).
Lenders buy your score from three national credit reporting agencies (also called credit bureaus): Equifax, Experian and TransUnion.
In the eyes of most lenders, scores above 700 are very good and a sign of good financial health. Scores below 600 indicate high risk to lenders and could lead lenders to charge you much higher rates or turn down your credit application.
As you can see, payment performance and level of debt account for 65% of the points in your FICO score. The remaining categories are worth fewer points but are still very important especially for those who are aiming to earn the highest scores.
Want to rent an apartment? Without good scores, your apartment application may be turned down by the landlord. Your scores also may determine how big a deposit you will have to pay for telephone, electricity or natural gas service.
Lenders look at your scores all the time. They look at your scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail.
Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates. That’s why they are a vital part of your financial health.
There are many types of credit scores. They are developed by independent companies, credit reporting agencies, and even some lenders. As a rule, the higher the score, the better.
Each credit reporting agency calculates your score and each fico credit score may be different because the credit history each agency has about you may be different. Lenders may make a credit card or auto loan decision based on a single agency’s score, although others such as mortgage lenders often will look at all three scores.
Your score changes when your information changes at that credit reporting agency. This is good news! It means you can improve a poor score over time by improving how you handle credit.
Many insurance companies use something similar when setting your insurance rates, called a credit-based insurance score. You may be able to improve your insurance score by improving how you handle credit, which in turn may lower your premium payments on auto or homeowners insurance.
Some scores offered to consumers are just estimates and are different from the credit risk scores lenders actually use, although they may appear similar. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk.
How might you tell whether a score is estimated? Ask the company if the score is used by most lenders. If it isn't, it is likely to be an estimated fico score.
Your credit score acts like a financial report card about you. When you apply for a loan, mortgage, car lease, or credit card, the bank or lender uses your FICO score to determine whether or not to approve your request. Having a higher FICO number will vastly improve your financial opportunities and quality of life.
You can increase your score by tweaking them even if there's nothing incorrect on your report. Just by cleaning up a few items most people don't even think about, you can tweak your FICO by 20-40 points.
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Disclosure: I am an independent Credit Repair Cloud™ Affiliate, not an employee. I receive referral payments from Credit Repair Cloud. The opinions expressed here are my own and are not official statements of Credit Repair Cloud.