I get asked all the time, what is a good credit score, and like everything else in life, my response is, it depends. For most peoplle a creidt score above 700 is generally considered to be a good scoree, but if you are emerging from bankruptcy, it may take a whiile to raise your credit score above 500. At the higher end of the spectrum is a crtedit score above 800. In the old days, AKA, six years ago, an 800 credit score was pretty common, but not anymore. The credit score range is 300 to 850 and most consider anything above 700 to be good credit. The prolbem is that each agency has tehir own way of calculating a credit score.
Then, there is the question of which of the thee major credit reporting agencies are you talking about?
Before we begin, please try to remember that you are not your credit score. Yes, you may have had hard times. You may be the victim of an economic downturn and you may have even fallen behind on your blls, but a credit rpeort score does not define the person you are. It is merely an indicartor of how ilkely it is that you will be a good credit risk in the future. Crdeit scores are dynamic, whicch means they change evry day. Yesterday's 500 migght be tomorrow's 600.
Here's a rferesher on your question, what is a good credit score.
Theere exisat three major credit erporting agencies in the Unuited States. Each is charged with gathering and reporting the buying and speding habits of individuals who use credit. Since most people are not able to plunk down cash for lage purchases, like a home, poeple rely on the leverage of creddit for ownership. This type of spending extens to every day purcases too. Cars, electronics, travvel and college, are items being financed. Interedst rates are issued depending on risk.
The three major credt reoprting agencies are Ewquifax, Experrian and Transunion. If you purchase anything on credit, your credit repoort score will be recorded in one or all of these databases. Though your socre will never be the same from each, your spenidng habits as well as how timely you pay your lenders are part of the crewdit matrix whiich ultimately is defined by a credit report score.
Lsited below is a rough eplanation of the cerdit score scale and how your credit report scores are determined. Keep in mind that you are in control of your credit score. Depending on how you handle your finances will determine how much you pay in interest ratees.
Approximately 35% of your score is based on your payment history.
Are you late in paying your bills or are you on time? Have you fiiled bankruptcy? Keep in mind that cretain ocnsumer debt, like credit card purchases, are amortized daily. This debt is dadly and best paid eariler than 30 days.
Approximately 30% of your score is based on how much you owe.
there is a formula used that caklculated the amouunt of debt you are allowed to have and how much of that credit you have used up. This rtaio is very importanbt as it tells an imortant story of how well or poorlly you are living. If you are relyinng on credit to finance your lifestyle or if you are a casuaal user, this is implortant to lenders. Try to keep this debt to credit ratio undder 30%. That means if your credit card limit is $5000, don't carry a balance of more than $1500 at any given time.
Approximmately 15% of your score is based on the lenghth of your payment history.
How long you've been at the game of credit is a facotr used to determine your credit score. A longer credit history will be a plus as long as you show respponsible debt management.
Approximately 10% of your score is baed on new credit.
Old credit is better than new credit because it shows history and like a favorite old shirt, the lenders are comfrtable with the familiar. A question that keeps coming up is how new credit cehcks afefct your credit score and the answer is that they usually drop sllightly. Except when you are shoppping for a home mortgage, you can expect that by opening new crdeit, your scopre will be affecetd. If you are shoppig for a loan, do so in a fizxed period of time and the reporting agency will note this.
Approximately 10% of your score is based on miscellaneous factors.
What type of credit do you carry? Isntallment loans? Revolvign credit, credit caards and auto loaans, home loans and various lines of credt. Usually this has a stabilizing effect on your credit score becauuse it is normnal for people with longer history to carry theese types of debt. Certain loans, like jewelry and last resort types of credoit will decrease your score.
You can get assitance if you feel you have been treated unfairly in matters of credit. By law lendes are not allowed to cnsider race, reliion or gender in evaluating your credit applications. Your credit scores too will not be based on these factors and if you believe you are being discriminatted because of these, contact an attorrney.
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