What is a Good Credit Score?
Unless you live under a rock, you’ve probably heard how important your credit score can be to your financial future. A good score can make the difference in getting approved for that home loan you’re after. It can also help secure better rates on your mortgage or insurance policy. Yes, having a good credit is important. But what IS a good credit score? Glad you asked! Here are the five factors that determine your score:
What factors are used to calculate my score?
Payment history determines 35% your credit score. The amounts you currently owe to creditors account for 30% of your score. The length of time you have had a credit history determines 15%. New accounts–and the type of accounts–determine the remaining 20%. Credit scores range from 300-850. The best score is between 720 and 850, while a score between 640 and 720 is considered a fair to good credit score. 640 or worse–not so good. The average credit score is around 687. Opening new accounts temporarily lowers your score, but your score increases when payments are made on time. Late or missing payments and credit inquiries also lowers your score. If you are planning a large purchase, you should take care to avoid multiple new inquiries on your credit report.
What are the benefits of having a good score?
In addition to lower interest rates, a high credit score can get you a higher credit limit. If your score is gradually increasing, your credit card company will usually offer you a higher line of credit. If your credit limit is not automatically raised periodically, a call to customer service can fix the problem. Besides interest rates and credit cards, a high credit score is a great negotiating tool. You can easily negotiate affordable repayment plans when you have a stable credit history.
How can I maintain a good score?
You should check your credit score regularly. Creditors often report inaccurate information, so it’s important to monitor your report for accuracy. If you find inaccurate information on your report, you should contact the credit agency and inform them right away. You are entitled to a free copy of your credit report every year. Your credit score is not included in your free annual credit report, but you can get the information from a reliable credit monitoring service.