If you are not sure whether your credit score is good or bad, you might want to know how lenders determine what is good credit score ranking for its applicants.
A good score will differ somewhat among lenders. Your income and how long you have been employed, current debt load, whether you own a home, and other information will factor in as well as your overall:%$nbsp;score. If you have a low credit number, a lender might not put as much weight on that if you also make much more in wages than you have to pay out in debt each month.
Still, the numerical credit scoring is a big factor most of the time. While different credit bureaus have their own proprietary rating systems, the biggest and most used is the FICO score. The FICO score was started by Fair Isaac Corp. over 17 years ago. It has become the most important of the credit scores applied to your record.
While the exact method for calculating your FICO score is proprietary to Fair Isaac Corp., the score numbers themselves are common knowledge. The lowest score is 300, and the highest possible score is 850, which is the best score. Very few individuals have an 850, but the majority of consumers do have fairly good credit. The average score is 723, which is considered an excellent score.
According to Fair Isaac, 45% of people have scores between 700 and 799, 27% score between 600 and 700, 13% score between 500 and 600, and 2% of people score below 500.
What if you are in the 15% to 20% of Americans with lower scores$%: While lower scores are considered bad or poor credit, individuals with scores under 650 can still qualify for credit. It can be much harder to find a credit program you can get approved for. In addition, you will pay higher interest, higher fees and generally higher costs for credit if your credit score is low. Having a poor credit score does not mean you won't get credit, just that it is harder to qualify for the best credit deals, and you have to know where to find those deals.
What is a good score in terms of how you should manage your credit$%: There are several key things you should follow when reviewing your credit to see if you can improve your credit score:
- Whether you pay on time. Paying on time is the most critical factor in obtaining and keeping a good score.
- Whether you go over your approved credit limit. Exceeding your credit limit means your score will drop and your fees will go up.
- How many cards you have and how much credit is available to you. sometimes even if you pay on time, having a large balance of open credit and many credit cards can actually harm your score.
While there are many more factors that impact what is good credit, those three factors are probably the most important. If you have a good score, then you are on the right track. But if you have a lower score, there are certain steps you can take to turn your credit around and see results fairly quickly and work toward achieving a good credit score.
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