What is a Good Credit Score?
How do you know if you have a good credit score? Well…if you are looking at your credit score and you aren’t quite sure if it is good or not, here’s a helpful, general rule of thumb. For a score with a range between 300-850, a credit score of 700 or above is generally considered good. If you have a score of 800 or above on that same range, it is considered to be excellent.
For a majority of the population, their credit scores fall between 600 and 750, with the greatest number of people coming in around 680 to 700. Where your score lands is important because your credit score is one of the first things lenders consider when deciding if they want to give you credit. Higher scores represent better credit decisions and can make creditors more confident that you will repay them.
Credit scores are used by lenders, including banks providing mortgage loans, credit card companies, and car dealerships financing auto purchases. They use them to make decisions about whether or not to offer you credit and what the terms of the offer (such as the interest rate or down payment) will be. There are many different types of credit scores. FICO® Scores are the most important scores to pay attention to (in this day and age) because over 90% of lenders use FICO® Scores to start their decision process. (It’s important to remember that your credit score is only one factor in the underwriting process. Lenders will include several different factors to decide if they should give you credit.)
What is a Good FICO Score?
As I mentioned above one of the most well-known types of credit score areFICO® Scores, created by the Fair Isaac Corporation. FICO® Scores are used by many lenders, and often range from 300 to 850. A FICO Score above 670 is considered a good credit score on these models, and if you have a score above 800 it is considered exceptional. So if your FICO Score is over 800…Congratulations! If you don’t know your credit score and would like to know what lenders will see when they check your score, you can go to myFICO and order a report directly from the myFICO website.
Why Credit Scores Matter
The last thing I want to mention is why your credit scores matter. Credit scores are decision-making tools that lenders use to help them anticipate how likely you are to repay your loan on time. Credit scores are also sometimes called risk scores, because they help lenders assess the risk that you won’t be able to repay the debt as agreed.
Having good credit is important, because it determines whether you’ll qualify for a loan. And, depending on the interest rate of the loan you qualify for, it could mean the difference between hundreds and even thousands of dollars in savings. A good credit score could also mean that you are able to rent the apartment you want, or even get cell phone service that you need.
Think of your credit scores like a report card that you might review at the end of a school term, but instead of letter grades, your activity ends up within a scoring range. However, unlike academic grades, credit scores aren’t stored as part of your credit history because your score is generated each time a lender requests it.
If you have questions or would like to know more about how our CreditSense—Smart Money Mentoring Team can help you, all you need to do is CLICK HERE and tell us how to connect with you. We’ll even give you a Fundability Checklist for free.