November 13th, 2008
What is a Good Credit Score?
Most people know what a credit score is, but not really what it means or is all about. What qualifies as a good credit score? Some people consider a good credit score to be 720+, but this is classified as above average credit, or “very good credit”. Most people do not have a credit score that is this high, but with some time and some effort, you can achieve a higher credit score.
So what does a good credit score mean for you?
Good credit can get you lower percentage rates on your purchases and loans, and bonuses like miles and gifts. You can get department store credit cards, and you can get better loans. People with good credit can buy cars and homes with the financing that they need. If your credit score is not high enough, then you will either be denied outright for these types of financing and lending, or you will be forced to accept much higher interest rates, which really isn’t fair but is unfortunately up to the lender to decide.
When you have a good credit score, you can get approved for any type of financing that you need. Most credit scores reach as high as 850, and with a credit score this high, no one is going to have an issue lending to you. However, what is considered good credit is different to everyone, and some lenders are perfectly satisfied with lower credit scores as long as your credit report does not show anything really terrible. What some people may consider to be “so so” credit may actually be decent credit to a lender when it comes to getting a car loan or a home repair loan.
Generally speaking, a credit score below 600 is considered to be poor, and anything between 600 and 700 is continued good or fair. Having a good credit score is important, because it allows you to get the financing that you need, no matter what it is that you need it for. Because you never know when you are going to need money fast, having a good credit score is vital. If you suddenly have medical bills to contend with or an issue with your vehicle that needs to be repaired, then you need to be able to get a loan or a line of credit fast, which is much easier when you have a good credit score. Having a good credit score is a good way to make sure that you can get the lending you require whenever you require is, so start building a healthy credit report and score now, and take advantage of the results over time and you will surely be glad that you put effort into keeping your credit score high and your credit report in good standing with all three credit bureaus.
Credit Karma provides free credit scores along with national averages. Read more about what is a good credit score on Credit Karma.
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A good credit score is vital in obtaining a mortgage these days. However, I have found that first-time buyers can have a lower score and still get a great rate on a mortgage. This is fantastic for first-time buyers because they can get more home for their money.
Also, if you haven’t checked your credit report (from all 3 agencies) then you may want to do so just to see if there are any errors that you can correct. That will also provide a spike in your credit score if you can get any of those negative erroneous items erased.
I guess it’s all subjective. What was a good score a year ago will get you nothing now.
A credit score has a wide scope today and people often forget about its implications in background checks and its use in figuring insurance premiums.
Credit scores touch our lives in so many ways. Employers, lenders, insurance companies, and cell phone companies all use them. This is a reality.
But let’s look back at life before credit scoring. People were judged on their race, their gender or their neighborhood residence.
When I took my first training class on credit scoring, one exercise the instructor did was to make us read credit reports and make lending decisions without a score. This led to “under lending” in most cases. Plus, it took longer so some applications were never read. That led to more under lending. A credit score isn’t perfect but it has made more lives better and right or wrong…credit scores are a reality.
You know, I deal with credit troubles everyday with my job as a housing consultant. I see so many more bad credit scores than good credit scores. People need to understand that with a little time and work, they can get themselves back into a position to buy right.
If people would just take the time to understand how credit works and how to manage it, they could help themselves out so much. The difference in rates and types of loans and programs available could be the difference of being in their dream home or settling for just enough to make it by.
Understanding your personal credit and general credit knowledge should be taught in a high school finance class.
Today esp. with our economy our credit scoreis vital to our lives. People also need to be aware of the things that causes negatives on our reports. Something so simple as making a late payment or consulting with a credit consolidator it all brings our credit score down…
620 is generally the cutoff for prime rates
You are right. 720+ credit score is a very good credit score but if anyone have a credit score of above 680 then he will get approve for a loan with affordable rates and terms.
A good credit score is vital in obtaining a mortgage these days. However, I have found that first-time buyers can have a lower score and still get a great rate on a mortgage
I think anything above 700 is a good credit score to obtain a loan with better rates and terms but if the credit score is 720 then it is certain better.
There was a time when my wife and I were basically forced to file bankruptcy due to fraudulent actions of Wells Fargo that created draft checks with claims that my wife so called authorized such draft checks, which then I ended up having to shell out $82.50 (27.50 for each time the draft check bounced and for being forced to put a stop payment on it). Not only that, but every bank I went to asking about draft checks, they all said there was no way to stop a such draft check. Hrmmm, here’s a major loop hole that has to be filled in. All it takes for a company or someone else to create a draft check or numerous draft checks without the owner of the checking account knowing about it until after such draft checks has hit is for a such person to write down the routing number and the account number off a check handed to them, which then that person could create and submit such draft checks against the checking account, which then the owner of such checking account would be reported to Chex system and would not be able to open another checking account for 5 years (that’s how long it takes for a such report to drop off from Chex system). Even before the bankruptcy, my credit score was below 600 due to insufficient income for living expenses purposes with just a household size of 1. It was though just a year after my wife and I were married that we ended up filing for bankruptcy due to the combined debt we had prior. For me, it was due to insufficient income with getting no help from the government while in college, and my wife while being supported by her parents, she majorly misused her credit. The only help I had was a relative of mine paying for my rent, but I still had to pay for everything else, which still wasn’t easy with just $4,000 income PER YEAR in the mid 1990’s.
Things didn’t turn around for us until February of 2001 when income had finally jumped up significantly to at least move our income financial status from Red (Not enough to pay for everything with regards to debt payments and necessary living expenses) to Yellow, though still very close to Red, which we were finally able to at least start paying for those debts.
Now, my credit score is 761. However, as for the financial status that I put the family at, we are still very close to the Red, though a bit further from the Red than before cause of the following I have done:
All debt is being paid back
The only debts left to pay off are student loans, which has been in repayment since I started paying them off in 2001, and the mortgage itself, which given the rules with regards to the mortgage, I plan on having that paid off ASAP. Student loans aren’t forgiven within bankruptcy, even under the old rules, they weren’t forgiven.
I have been able to create a back up fund and fund it with substantial amount over the years (though this has not been easy to do and it’s been majorly tested over the last 4 years). It was up as high as $7k at one point of time, but it had dropped a lot, which of recent, been able to take it back up to $5k, which is still well below of where I would like it to be.
I was financially able to get into the 401(k) plan in December of 2001, which also serves as another source of funds should I need it, though given the double taxation effect of taking loans against the account, I would rather not use that option if I can reasonably avoid it.
July of 2003, I switched doing the budget from on paper to within Excel. That proved to be a very good thing as rather than me having to do all of the tedious math and in come cases, complex math as well, I just setup the formulas within Excel and let Excel do the math for me. Not only that, but it also has cut down the amount of time it has taken to do the budget, which before, I use to do it only for monthly basis. Now days, like right now, I am in the midst of my 2 calendar year planning, which I plan out my expenses to the extent reasonably possible for the next 2 calendar years (January 2010 to December 2011). Why do I do this in August/September? It’s so as I know where we stand financially, so when it comes to open enrollment for benefits at work in October, I will be ready to do the last bit of assessments left to do, and then make my decision from there of what options I want and what options I don’t want as to what fits best relative to our family’s situation. As a matter of fact, which me having taken the budgeting over to Excel, I have been able to take it to the next major level and that is to also factor in residual income vs residual expenses and let Excel do the calculations, so as I only have to do other minor calculations to take into account other regulations as to where the extra money goes to, so as to get the most bang for the buck.
Income been more or less stagnant since 2001 with only minor increases, but it’s still better than what others are in.
As for our financial health at the present time, where do we stand on a scale of 0 to 100 with 0 being rock bottom and 100 being at the very top? For my family, I would say we are about a 30. We were as bad as a 5, but now up to a 30.
Why do I rate it only as a 30? Simple. Even though I am working and have been able to keep up with the payments and what not, what would happen if we lost significantly more income, or worse yet, what would happen if something was to happen to me? Yes, there’s such thing as life insurance for the latter, but one has to pay for other things before one can even think about paying for life insurance. Not only that, but in many cases, life insurance basically charges an arm and a leg for it (by the time you factor in the time value of money, you will see what I mean by this), which makes it worthless.
As for the credit score, I find it’s too biased as it only takes into account the use of credit and it’s totally missing the other half of the picture, the income side. Therefore, if your available total credit is really low compared to your income, then that will drop your score quite a bit even though you been able to pay it in full every single month. If you do pay your credit card off in full every single month like I do by the due date, it makes no difference to the credit score than if you were to pay just $1.00 over the minimal balance every month by the due date.
The credit score also doesn’t take into account of your assets either. Therefore, while the credit score may be an indicator, that would be all it would be to me as it’s too biased.
Well, to speak truely, a moderate score is enough for people like me, i don’t believe in messing my credit score too much.
I am 18 years old as of Septemeber. I have done everything I have heard of to build credit. So far, I have a cell phone through T-Mobile, a Victoria’s Secret Credit Card, I took out a loan and I have almost paid off my loan. I don’t have anything negative on my credit report and I have made all my payments on time. So far, my credit score is 615. Is that good for an 18 year old?
For just having turned 18, you are off to a good start. The department store credit card is a good start. The key is to make all your payments on time and do not apply for too many credit products. In a year, I suggest applying for a general purpose credit card, student ones generally have lower credit requirements.
To build good credit, always pay on-time and don’t over spend. The score will follow.