Did you know that credit scoring plays a huge
role in deciding your financial status? So, you may ask,
“
What is a good
credit score?” For you to
understand how good credit scores can benefit you, you need to become
familiar with the factors that make your score in the first place.
Your credit score is calculated with a
mathematical formula. Different categories are weighted by their
importance and then compared to all other credit holders using a
standard comparison scale. This score basically shows how credit worthy
you are and the likelihood that you will make your payments.
The credit score scale runs from 300 to 850,
300 being the lowest. Depending on how high your score is will
determine if you qualify for certain types of loans and what kind of
interest rates you will get.
Lenders and reporting agencies use different
types of scoring patterns to decide how credible you are. Because they
differ from one another, you may have a 700 score from one agency and a
720 at another.
Recent studies have shown that Americans
have credit scores of the following: 800 and above – 13% of
the population, 700-800 – 45%, 600-700 – 27%.
What is a good credit score then? It has
been generally decided that if you have a score of 700 or above, you
are considered to be in good standing. If the average borrower has a
score between 600 and 700, then you can guess that above the average
would be considered good.
There is a new scoring model being
incorporated into all three credit reporting bureaus called
VantageScore. The scores in this model range from 501 to 990 with
attached letter grades from A to F. So if I were to have a score
between 501 and 600 I would have an F. A credit score of a C would be
considered a good score in this model.
You should also be aware that there are 20
factors within five categories that are taken into account to get your
credit score. They include your payment history, amount you owe and
available credit, credit history length, new credit, and types of
credit used.
So you have asked, “What is a good
credit score?” Hopefully, this information has given you some
insight on what is considered a good credit score. Do your best to get
and maintain a score between 700 and 720, if not higher.