Credit score is becoming more and more important in today’s day and age. A good credit score serves as a qualification requirement for loans and determines whether you could be eligible for lower interest rates or more favorable loan terms. When you want to establish utility services such as phone or cable, apply for insurance, or even rent an apartment, most providers now look into credit scores. Bs a result, maintaining a good credit score is important. Here's what you need to know about credit scores.
What exactly is a “good credit score?”
What’s a three-digit number that can either make or break your financial deal? Yes, you got it right, it’s your credit score! But what kind of credit score can be classified as a “good” credit score?
There are several sources for finding your credit score. However, the FICO® score, developed by the Fair Isaac Corporation, is the most widely used credit scoring model. Generally, FICO ® scores range from 300 to 850. Here is a look at the FICO® score ranges and their equivalent rating:
Credit Score Range : Rating
800 to 850: Exceptional
740 to 799: Very Good
670 to 739: Good
580 to 669: Fair
300 to 579: Very Poor
It is important to note that a good credit score cut-off will vary depending on the type of financial institution that you are dealing with. For example, if you are applying for a mortgage loan, your score must be between 700 and 759. For an auto loan, your score is ideally above 740. And to get the best rewards cards, you must have a score of 720 at minimum.
Factors that Can Affect Your Credit Score
Generally, your credit score is determined by the following factors:
- Length of credit history
- Loan and credit card payment history
- Number of credit accounts
- Total debts and amount owed
- Credit utilization ratio
- Public records including bankruptcy, tax liens, and civil judgments
- Recent credit inquiries and activities
Checking your annual credit report regularly is one of the most important habits to develop if you want to improve your credit score. By verifying your credit record, you’ll be able to check for errors. This allows you to dispute discrepancies when applicable. Checking your credit reports will also help you identify signs of possible identity theft, which is becoming more prevalent.
You can get your credit report at no cost once every 12 months from each of the three widely recognized credit bureaus: