What is Good Credit?
A good credit score is a score between 700 and above. With a good credit score, you get access to attractive rates and terms when you apply for a loan. However, stating whether or not a particular credit score is good is complicated. This is because the threshold for what’s considered as good may vary depending on the type of loan you are applying for and the lender involved.
When applying for a new credit card, you will not be intimated about what that particular lender’s exact cutoff point is between a good credit score and a bad one. This is because lenders generally do not reveal their credit score threshold to the public. However, FICO, the most widely known credit scoring model, shares some helpful information that borrowers can use as guides. The most common FICO score is that which features a scale of 300 – 850. On that scale, a credit score between 670 and 739 is generally seen as being “good”.
How to Get and Maintain a Good Credit Score
Understand that there is no secret formula to building a strong credit score. However, there are a few guides on how you can get and maintain one:
Avoid getting close to your credit limit
Credit scoring models check how close you are to being “maxed out”. As such, you must try to keep your balances low as compared to your total credit limit. According to experts, it is advised that you keep your use of credit at no more than 30 percent of your total credit limit. You do not need to revolve on credit cards to get a good score. Thus, paying off the balance each month helps get you the best scores.
Pay your loans on time, every time
To be sure that you’re making on-time payments, you have to set up automatic payments or set up electronic reminders. In case you missed payments, get current, and remain current.
Fast-check your credit reports
Only apply for credit that you need
Credit scoring formulas always take a look at your recent credit activity as a signal of your need for credit. If you have applied for a lot of credit over a short period of time, lenders may perceive that your economic circumstances have changed negatively.
A long credit history will help your score
Credit scores depend on experience over time. That means the more experience your credit report shows with paying your loans on time, the more information there is to determine whether you are a good credit recipient.
Factors that Affects your Credit Scores
The information that affects a credit score differs depending on the scoring model in use. Credit scores are generally affected by elements in your credit report, like:
- Firstly, the credit utilization rate
- Total debt
- Thirdly, payment history for loans and credit cards, including the number as well as the severity of late payments.
- Also, type, number and age of credit accounts
- Moreso, the number of inquiries for your credit report
- Then, the number of credit accounts that you have recently opened
- Lastly, public records like bankruptcy.