What Is A Good Credit Score?
Your creditworthiness is more important than ever. Your credit score can save you hundreds or thousands of dollars in interest on loans, help you to get into a rental property or home, and save you money on insurance premiums. It pays to know what your score is and how you can improve it.
What is a credit score?
Credit scores are based largely on reports from lenders and retailers and are used as an indicator of how likely you are to repay your loan. Your score will also determine a loan’s rate and term. The better your score, the better rate you will receive. Keep in mind that there are 3 credit reporting agencies – Experian, Transunion, and Equifax. All lenders don't report your credit information to all three bureaus, so your score can vary.
What is a “good” credit score?
Credit scores usually range from 400 to 830. The higher the score, the better the credit. Each financial institution assigns a credit score range from poor risk to good risk. On average, a score of 650 or higher is considered a good score.
Here’s what influences your credit score:
- Payment history: 35%
- The amount of credit used compared to the credit available: 30%
- Length of credit history: 15%
- Mix of credit: 10%
- New debt: 10%
Here are 3 factors that don’t affect your credit score:
- Checking your own credit report or score—Since you are inquiring about your own credit, this is considered a soft inquiry of your credit, and doesn’t affect your score. If you apply for a loan, this is a hard inquiry and it can affect your score.
- Debit card usage—Financial institutions don’t report your debit card usage to the credit bureaus.
- Your income and account balances—A credit score is a measure of how you manage credit and doesn’t include how much money you have in savings or how much money you make.
Checking your credit report for your payment history, the amount of credit being used, and more can easily be done for free at www.annualcreditreport.com. A great time to review your credit is before you need a loan, just in case you need time to fix errors or boost your score.
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