A good credit score is essential for your successful creditworthiness. Lenders or creditors consider 3 digit score to validate your financial risk before a new mortgage, loan or credit card approval as well as your interest rate charged. Thus, we must get how your good score is to achieve it.
Good credit scores is NOT one number
One fact that you might not know is to determine a good credit score depending on the rating system. Different scoring methods will scale your score in different numbers, that means you have more than one credit score: FICO credit score, VantageScore, Plus Score, Equifax credit score, etc. Although there are differences between systems, however, they share some common standards such as: most credit scores fall in range of 300 to 850, a score of 700 would be a good score, the higher number the better benefits.
Hence stating some most popular credit score range scales in US.
FICO score: 300 – 850
VantageScore (3.0): 300 – 850
Equifax credit score: 280 – 850
Plus score: 330 – 830
The essential point is if you got a Equifax score of 680, but your lender uses FICO score to validate your application, you might not be sure your credit position is strong enough. A wise man will know which type of score the lenders look at and how many score a good score is.
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Credit score categories insights
So now we all know our good credit score isn’t just one particular number, therefore, credit reporting agencies categorize the scores into several ranges. If your score is in a category, you know how your score is and whether it’d be a good score. Let’s take a overall look:
Excellent credit: 800 and above
If you were in school now, you would get an A+ on your personal finance. This is a dreamland of the credit world. You remain a exceptional good payment history and credit utilization rate. You have managed well distinct kind of credit cards, loans. The lenders have no doubt to approve your credit application as soon as possible.
Very good credit: 750 to 800
This number proves to your creditors that you are a responsible borrower. You managed to avoid late payments, to have an exceptional ability to work on various credit types. Yet you’ve got a bit high credit utilization rate and debt over your income ratio. However, you still get a best offer in town.
Good credit: 700 to 750
You are just far 50 points to the higher rank, so basically the credit bureaus find your solid credit history but you encountered some late payments, have some credit card debt, but you nail it under a stable status. Lenders don’t find any big reason not to loan money to you, however, the interest rate would be a competitive one, not a highest privilege.
Fair credit: 650 to 700
Lenders see you as a high risk for the next credit because your history tells a story of late payments, collection accounts not paid yet, and perhaps shouldering a big bump of debt. In this case, creditors will ask you for a proven personal property info or a down payment. The insurance companies would also jump in the game because of bankruptcy potentials. Of course, there is a window for you to get a credit but the price is stacked up higher by a interest rate and fees. And you have to improve your credit score from now onwards.
Bad credit to very bad credit: below 650
These categories tell lenders that you got a unpleasant experience in payment history, active collection account and had a bankruptcy in the past. You are struggling to manage the debt and usually use more than 20% of your credit limit. In this case, creditors won’t approve you for any new credit even you are willing to provide a down payment. The insurance companies will likely not help you to secure your application as well. But the worst negative effect would be not to be recruited by employers, so you are hardly to get a good paid job.
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How credit scoring models determines a good credit score
“The biggest driving factor to a score is delinquency payments or payment history”, Manager of Experian Analytics Arlene Dang said. This reveals a truth that credit scoring companies developed this with a certain mechanism as below:
Review the consumer’s historical credit profile
Examine the credit history to determine common variables
Predict credit behaviors based on statistical analysis
Weigh each variable to get the final score
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So, in the end, a good credit score (700 and above) is our all objective and it takes time to build up. Mostly you can’t have a big difference in your score in just few days because the credit scoring models analyze your credit report in years. Therefore, being patient and improving your credit behavior piece by piece will make differences and reward you the fruits.
If you have any question about credit score, leave your comment below.