What Is A Good Credit Score?Leave a Comment
What constitutes a good credit score is determined by a FICO rating. A FICO score is a method by which your overall credit status is rated. Credit scores are used by most lending institutions in order to decide if you are credit worthy.
The factors that are considered in rating a FICO score are:
1) Repayment history: 35%
2) Money owed: 30% (don’t over extend)
3) How long you have had credit: 15% (the longer the better)
4) Recent credit: 10% (too many is not good)
5) The kind of credit: 10% (credit cards, mortgages loans and others)
The above factors are then averaged into one credit score giving you a 3 number credit rating. Credit scores range from 300-850. The lower the credit score, the lower your chances of obtaining a good rate of interest on loans. In fact, a low credit rating can mean you will not be approved.
A rating of 700 is considered a good credit score. A credit score that is over 700 is excellent, and will allow you to obtain credit at a decent interest rate, and as everyone know, obtaining a lower interest rate will save you a lot of money on a loan.
Many people average around 650-700, but if your score is below that average below that average, there are ways to increase your score. Simply paying a little more each month on your outstanding loans will make a huge difference in your balance due and can quickly lead to a better overall score. Also, you must pay on time if you aren’t doing so already. If you are consistently late in paying your bills, your credit score will suffer greatly.