What is a Good Credit Score?

No doubt you’ve seen the TV commercials about credit scores. Specifically, a gentleman talks about his 785 credit score and what it signifies. Having a good credit is essential in obtaining higher credit card balances; buying a new auto; or applying for loans. What is a good credit score?

While most people score in the 600s and 700s, credit scores above 700 are very good. FICO scores below 600 indicate high risk to lenders and could lead lenders to charge you much higher rates or turn down your credit application. Credit scores affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. For most kinds of credit scores, higher scores mean you are more likely to be approved and pay a lower interest rate on new credit.

Perhaps you want to rent an apartment. Without good scores, your apartment application may be turned down by the landlord. Your scores also may determine how big a deposit you will have to pay for telephone, electricity or natural gas service. Moreover, lenders look at your scores all the time. They look at your scores when deciding, for example, whether to change your interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates. That's why they are a vital part of your financial health.

There are many types of credit scores. As a rule, the higher the score, the better. The three credit report agencies: Experian; Trans Union and Equifax may score you according to their own standards. Therefore, while you may have a higher score for Equifax, you may score lower with Trans Union. Your credit score changes as your information changes. Thus, the more responsible you are; the better chance you have of achieving a higher score. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer's general level of credit risk. How might you tell whether a score is estimated? Ask the company if the score is used by most lenders. If it isn't, it is likely to be an estimated score.

Keep in mind your score is based on several factors. Paying your accounts on time and if there are no late payments, bankruptcies, and other negative items can hurt your credit score. The amount you owe is also a consideration as well as the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be. A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.

What is a good credit score? In order to determine your score, check with the three reporting agencies regularly. This will guide you in ensuring you keep your score as high as possible.