What Is a Good Credit Score?
A credit score is only three digits long, but it can have a significant impact on your financial life. Your credit scores can impact your ability to qualify for a loan or obtain a credit card by informing potential lenders about your ability to repay your debts. It is a fact that understanding credit score ranges can help you determine whether your credit needs some TLC. And understanding the factors that influence your credit scores can assist you in determining how to improve them over time.
What exactly is a credit score?
A credit score is an assigned number from calculations using your credit reports. A lender’s decision to approve you for a mortgage, car loan, personal loan, credit card, or other types of credit can be influenced by your credit score. In addition, if you’re approved, your credit scores can impact the interest rate and terms you’re offered.
How are credit scores generated?
Credit scores are computed using data from your credit reports. Equifax, TransUnion, and Experian, the major credit bureaus we have, generate a credit report based on information provided by financial institutions. This report contains information about your credit history and your credit activity. Using the FICO or VantageScore model, they are converted to interpretable figures. All credit score models report similar credit information and are typically determined by factors such as your payment history, the amount of available credit you’re using, and the types of debt you have.
What range does a good credit score fall in?
Although credit scoring models differ, a score of 670 or higher is generally considered good. For FICO and VantageScore model, a good score ranges from 670 to 739 and 661 to 780, respectively.
Advantages of having a good credit score
A credit score in the good to the excellent range can change everything. Although financial institutions consider various factors when considering a loan or credit application, higher credit scores are generally associated with a higher likelihood of approval.
A good credit score can also lead to lower interest rates and more favorable terms. And if you have a high credit score, you have a better chance of being offered the best rates and terms.
If you have a poor or bad credit score, however, some lenders may approve you, but your rates will most likely be much higher than if you had good credit.