If you’ve ever attempted to get a mortgage, credit card, or car loan, chances are the lender mentioned your credit score. A credit score is often calculated using the information in a borrower’s credit report, such as payment history, length of a credit report, and debts owed. A credit score helps creditors and lenders, like Payday Depot, evaluate a borrower’s loan qualification, credit limit, and interest rates.
A credit score is among the main defining factors a financing company takes into account to determine whether a borrower qualifies for a loan. It’s a three-digit number, which falls between 300 and 850, and measures an individual’s ability to make timely payments.
What Is Considered a Good Credit Score?
Lenders and creditors use several scoring models to determine an individual’s credit score. However, FICO and VantageScore scoring models are perhaps the most popular. Both scoring systems use the 300 to 850 range.
Credit scores also vary based on three major credit bureaus: Equifax, Experian, and TransUnion. Most financing companies can report to all three bureaus. But some lenders or creditors might report to one, two, or none.
That said, borrowers with a credit score ranging from 670 to 739 (FICO) or 661 to 780 (VantageScore) have a good credit score. A credit score below 601 is considered fair; those above 780 are considered very good, and 800+ are considered excellent.
How A Good Credit Score Can Help You
A credit score determines how much loan you can qualify for and the interest you’ll pay. With a good credit score, borrowers will enjoy several perks, including:
- Desirable car loan or lease
- Unsecured credit cards with low-interest rates
- Luxury travel perks
- Mortgages with satisfactory interest rates
- Best rates on homeowners’ insurance
- Ability to open new credit to cover expenses in times or emergencies
How To Get a Good Credit Score?
If you have a bad credit score, the tips below will help you achieve a good and even excellent credit score.
Pay bills on time: Avoid missing payments on credit cards, cell phone bills, electric bills, and other accounts. That’s because missed or delayed payments might get reported to credit bureaus, which can affect your credit score. Avoid late payments by setting up a reminder on your calendar or using Autopay.
Always clear debts: Ensure you pay all your debts as quickly as possible.
Pay In full: Borrowers need to pay all their bills in full monthly to reduce their utilization rate.
Keep credit card balance below the limit: Keep in mind a higher credit card balance will impact your credit limit as well as credit score.
Avoid opening multiple accounts at once: Every time an individual applies for credit, the lender runs a hard credit inquiry. Whether your application gets approved or denied, your credit score will reduce by about 5 points. Although, the points will bounce back. It’s wise to avoid opening several accounts at once so you don’t hurt your credit score.
A good credit score range depends on the scoring model. However, it often ranges between 650 and 780. Having a good credit score allows borrowers to qualify for loans with better terms. Besides, they can enjoy other perks like luxury travel benefits and the best rates on homeowners’ insurance. If you desire a good credit score, start making timely payments, clear your debts and apply for credit sparingly.