Why Having a Good Credit Score Is Important

A credit score of 700 or higher is usually considered fine for a score ranging from 300 to 850. On the same scale, a score of 800 or higher is deemed exceptional. The majority of customers have credit ratings ranging from 600 to 750. The average FICO® Score in the United States in 2020 was 710, up single digits from the prior year. Creditors will be more secure in your ability to repay potential loans if your score is higher. When assessing borrowers for loans and credit cards, creditors can establish their internal standards for what they deem to be good or bad credit scores.

This is partly determined by the kinds of applicants they want to acquire. Lenders can also consider how current conditions can affect a customer’s credit score and change their criteria accordingly. Some lenders design their own proprietary credit scoring systems, but the FICO® and VantageScore® credit scoring templates are the most widely used.

What Does a Good FICO® Score Look Like?

FICO® generates a variety of credit ratings for consumers. The organization creates “base” FICO® Ratings for lenders in a variety of markets, and also sector-specific credit scores for credit card companies and car creditors.

FICO® Scores vary from 300 to 850, with 670 to 739 being considered “healthy” by FICO. Credit scores vary from 250 to 900 points. The middle ranges, on the other hand, have the same groupings, as well as a “good” industry-specific FICO® Score, ranges from 670 to 739.

What Does a Good VantageScore Look Like?

The first two VantageScore credit scoring variants had scores of 501 to 990. The 300 to 850 scale is used for the two latest VantageScore credit scores (VantageScore 3.0 and 4.0), which are the same as the base FICO® Scores. VantageScore considers 661 to 780 to be a good range for the most recent models.

What Factors Influence Your Credit Scores?

Both of your credit ratings are affected by common variables, which are usually divided into five types:

Making on-time contributions on your credit cards will help you improve your ratings. However, failing to make payments, getting a balance sent to collections, or declaring bankruptcy will also lower your credit ratings.

Credit use includes how many cards have balances, how much users owe, and what percentage of the credit balance you’re spending on revolving balances.

Credit history length: The cumulative duration of all your credit cards, as well as the ages of your earliest and newest accounts, are included in this group.

Account types: This is also known as “credit blend,” because it considers whether you’re handling both installment and revolving accounts.  Demonstrating that you can effectively handle all forms of accounts improves your overall rating.

If you’ve just qualified for or opened new accounts, this is taken into account.

Keep a close eye on your credit report and score

Evaluating your credit rating prior to applying for a new revolving credit card will make you visualize your odds of getting better terms—but checking it much more long in advance will help you boost your score and potentially save lots of money in interest. Experian provides free credit tracking on your account, which contains warnings if there is a questionable change in your rating in addition to a complimentary ranking and report.

Tracking of your credit score will allow you to take steps to boost it, increasing your chances of getting a mortgage, line of credit, apartment, or insurance policy while also enhancing your future prosperity.

 

 

About Oleg Stogner

Since 2005, Oleg has been involved with over $1 Billion in mortgage fundings and is recognized as an expert in residential mortgage lending. Oleg is licensed and able to originate mortgage loans in all 50 states. You can contact me here.