Your credit score is a three-digit number that can range depending on many different things. For a score that can range between 300 and 850, having a score of 700 or above is considered good. Anything above 800 is considered great. Most people will have a credit score that ranges between 600 and 750.
A Good FICO Score
One of the most common and well-known credit scores is the FICO score. It is used by many lenders and the range is from 300 to 850. If your FICO score is 670 or above, it is considered good. Scores of 800 to 850 are considered exceptional and applicants that have this score range are at the top of the list when it comes to getting the best rates. Scores ranging from 740 to 799 are considered very good and these applicants are also likely going to get better rates. Scores from 670 to 739 are considered good. Borrowers with a score below 670 are considered to be subprime by banks, lenders, and other financial institutions.
A Good VantageScore
Scores by VantageScore are also used by lenders. This score was developed by three major credit bureaus. It also uses a range of 300 to 850 and a score above 660 is considered good.
Why Is Your Credit Score Important?
Having a good credit score is an important factor in the decision making process for lenders. Lenders use the score to help them determine how likely you are to repay a loan on time. Credit scores can also be called risk scores since they help lenders look at the risk of you not being able to pay back your debt. A good credit score can help determine if you qualify for a loan and the interest rate that you will receive.
The interest rate can mean a difference of thousands of dollars in savings. A good credit score can also mean you are able to get the cell phone service you need or rent the apartment you want. Every time you have a financial goal, such as buying a new car or owning a home, your credit is going to be a part of that picture. Even though the credit score is important, it is not the only thing that lenders will look at when it comes to deciding if you are getting a loan.
Your credit report also has information that will be taken into consideration, such as the types of credit you already have, the amount of debt you have, and any other derogatory remarks. In addition to using both your credit score and your credit report, lenders also look at your monthly income and total expenses to determine if you are going to get the loan.
What Affects Your Credit Score?
There are different things that affect your credit score, depending on which scoring model is being used. Some of these things include your credit utilization rate, total debt, age of credit accounts, type of credit accounts, number of credit accounts, bankruptcies, number of inquiries on your credit report, payment history, and how many credit accounts you recently opened. When it comes to your FICO score, the most important thing on your credit report that impacts the score is your payment history on your credit cards and loans. The least important is the new credit and credit mix.
Similar to the FICO score, the most important thing for the VantageScore is payment history. The least important thing for the VantageScore is your recent credit inquiry history. Your score will not be affected by marital status, sex, religion, color, race, or national origin, as this is prohibited by U.S. law. It also won’t take into account your age, where you live, or your salary or employment history. However, lenders may use your employment history and salary when determining if you qualify for their loan.
Soft inquiries also don’t affect your credit score. Soft inquiries happen when you check your own credit or they can be initiated by others, such as a credit company making a promotional offer to you.
What if You Don’t Have a Credit Score?
You can’t have a good credit score if you don’t have any credit at all. You may not have enough credit history to have a score. Depending on how old you are, there are different ways to start establishing and building credit.
If you are under the age of 21, you will need a cosigner for a loan or show that you have a source of income that will allow you to pay back the credit you are given. You can have a parent cosign a credit card or add you to one of their accounts as an authorized user in order to start establishing some positive credit history. You can also work with your credit union or bank to open an account with a small credit limit in order to get started.
