Great and Not-so-Great: What is Considered Good Credit?

Financial experts are always telling people it’s important to have and maintain a good credit score. This score is assigned to people from the three major credit reporting bureaus. These bureaus are TransUnion, Equifax and Experian. The credit score a person gets is based on the level and type of financial information the credit bureaus can obtain on them. TransUnion, Equifax and Experian do not all operate the same way. It’s possible for a person to have a slightly different score from each of them.

Importance Of Credit Scores
Scores from the credit bureaus are used by companies to make financial decisions when it comes to loaning people money. These scores will determine if a person is a good or bad credit risk. They will be used for everything from offering a loan to issuing a credit card, determining interest rates and more. The higher a person’s credit score, the better deal they will be offered by financial institutions. Checking a credit score can also play a part in a person being considered for a job, applying for a place to live and other things.

Credit Score
This is a 3-digit number and represents a person’s credit history when it comes to paying back the money they’ve borrowed. The scores go from 300 to 850, and the higher the number, the better the credit score. A person is considered to have bad credit if their score is 300 to 629. An average credit score is from 630 to 689. Good credit is 690 to 719. Individuals who have a credit score over 720 are considered to have excellent credit. Financial experts advise a person to be responsible when it come to paying their bills on time.

Payment History
The biggest factor in determining a person’s credit score is their payment history. The higher scores mean a person pays their bills on time. Once payment is let go for 30 days or more, it will cause an instant decrease in a credit score. It is estimated that people with a credit score of 800 or greater pay all of their accounts on time approximately 96 percent of the time. A credit score of 650 or less shows an individual is part of the 68 percent who have accounts that are past due.

Checking A Credit Score
It’s important for a person not to assume they know their credit score without checking it with one of the credit bureaus. It doesn’t matter if a person believes they’ve always paid their bills on time or thinks they have a bad score because they haven’t. It’s important to regularly check a credit score. It is possible for a person to get their credit score free one time every month. Some of these services that provide free credit viewing also show all the factors that impacted a person’s credit score.

Lengthy Credit History
People who have scores of 800 or greater have been paying on accounts for an average of eleven years. People with a credit score less than 700 have an average of seven years of paying on accounts. It’s not important for a person to have several accounts for a good credit score. It is important they regularly pay the ones they have open on time. Closing old and inactive accounts could harm a credit score. That means an account with no balance may no longer help when determining a credit utilization ratio.

Purpose Of Credit Scores
Industries will each require different scores for their services. If a person wants to purchase a home and has a score of 500, they can qualify for an FHA loan. It’s been estimated that over 69 percent of the people who apply for car leases are approved. In many cases, finding a company to approve a loan isn’t difficult. The terms and conditions of the loan will be deeply impacted by a person’s credit score. Higher credit scores will always get the better terms and conditions.