What is a Good Credit Score
Different lenders have their own standards for rating credit scores, and that rating is usually determined using a scale of 300-850. With credit scores that range in between 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above is considered to be excellent.
Lenders typically use your 3-digit credit score to help them decide if they'll approve you for a loan or credit card. In general, the higher your score, the better your chances of getting approved. Having a good credit score can also help you save on interest rates.
Credit Scores Are Comprised Of:
- Payment history (35%)
- Amount owed (30%)
- Length of credit history (15%)
- New credit accounts (10%)
- The types of accounts (10%)
Payment History
This includes account payment information, bankruptcy or judgments, how long overdue payments are, amount past due, and the time since any adverse occurrences. It is a good idea to keep payments current and on time to avoid negative reports to your payment history.
Amount Owed
This means the amounts owed on individual accounts and totaled together as a whole, the number of accounts with balances, the portion of credit line used and the portion of installment loan amounts owed. Paying down or paying extra on credit accounts every month can help reduce the amount owed. Your credit utilization should remain at 30% or below.
Length of Credit History
The time since your accounts have been open as well as active. A longer credit history provides more information and offers a better picture of long-term financial behavior.
New Credit Accounts
New credit accounts for 10% of your total FICO credit score, but this doesn’t mean that opening multiple credit lines at the same time will improve your score. In fact, such behavior could suggest you are in financial trouble by needing significant access to lots of credit.
The Types of Accounts
Or, credit mix, includes the number of various types of accounts like credit cards, retail accounts, installment loans, mortgage, etc. Repaying a variety of debt products indicates the borrower can handle all sorts of credit.
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How to Fix Errors on Your Credit Report
What many Americans don’t know is there may be a lot of errors and negative items on their credit report. In fact, it’s reported that as many as one in five Americans have mistakes on their credit report.
Click here to learn about the strategies used to fix credit errors.
