Good Credit Scores A good credit score is determined by the analysis of the credit bureaus’ credit equations. A good credit score is 700 to 720. It is unfortunate that many individuals in today’s society posses a more mediocre credit score and not a good credit score. Not having a good credit score will dampen any chance you may have in obtaining a loan with a fair interest rate.
What Makes a Good Credit Score? A good credit score consists of first, the payment history reported on your credit report. This takes up the majority of the decision-making when averaging out your credit score. If payments are made on time with no delinquencies, these parts of the equation will score well. Keep in mind this part of the good credit score makes up 35% of the decision.
The next part of the equation is to determine the balances that you may owe on loans or credit cards. If you have a credit card with a $1,000 balance, but owe $950, this does not help you to have a good credit score. Your actual balance in this example would be 95% of your available credit; try to keep it below 50% for each of your credit accounts.
It is important to pay off your credit cards and reuse them doing this continuously. If your credit balance is high, meaning very close or at the maximum balance, you will not have high points added to your credit score. The length of your credit history follows this step.
Credit History And Credit Score It is important that you maintain a good credit history for a minimum of 1 year to rate well in this component of the scoring process. The last 10% of determining your credit score is determined by whether or not you have recently opened an abundance of new accounts. New accounts should not be opened more than one at a time.
- The following is a list of the credit scores and their meanings:
- * 730+ – Excellent credit
- * 700 – 729 – Good credit
- * 670 – 699 – Needs a closer look (possible high-risk credit, but average)
- * 585 – 699 – Higher risk credit
- * Below 585 – Limited credit history, poor credit
FICO determines these scores which range from 300-850, but 700 is the number everyone strives for in order to get a good credit score.
Keeping A Good Credit Score Keeping a good credit score will ensure that you will not have any problems when applying for a loan or credit card. With a good credit score there will be no worries if an emergency arises and you need quick money without having to pay a high interest rate. If you have a good credit score and need a loan fast, the documentation required to obtain this loan will be much less than for a bad credit loan. A good credit score consisting of a 700 or higher is the goal that every individual should meet.