What is a Good Credit Score Definition?
First of all, what is a Good Credit Score (CS) or what is considered a good credit score, in this article, you find out what a good credit score is, to begin with. Generally, when applying for financial products that include insurance, credit card, and more, your CS determines the level of quick qualification. However, with a good CS, you can enjoy a lot of benefits and rates, especially when applying for a loan. But most times with difficult to highlight if a particular CS is good or not. This is because the factors that are considered whether you have a good CS depends on the type of loan you’re applying for.
According to reports, 690 to 719 is what is considered a good CS from FICO scores and VantageScores. On the CS range, a score between 690 and 719 is considered a good score, and any score about 720 is considered excellent. But a score that is between 630 and 689 is considered fair and scores that fell below 630 are considered a bad credit range. With bad credit, you might not be opportune to enjoy what a good CS enjoys.
However, there are two most popular credit scoring systems used to score your credit which include FICO and VantageScore. FICO is the most commonly used credit scoring system and you can know what is considered good credit scores between VantageScore and FICO.
Understanding Credit Scores
A credit score is a numerical representation of an individual’s creditworthiness. It is a reflection of how likely someone is to repay their debts on time-based on their credit history. Credit scores are generated by credit reporting agencies using complex algorithms that consider various factors such as payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries.
Importance of Credit Scores
Credit scores play a vital role in the financial world. Lenders, such as banks and credit card companies, use credit scores to assess the risk involved in lending money to individuals. A good CS increases the likelihood of being approved for loans, mortgages, and credit cards at favorable terms. It can also influence decisions regarding rental applications, insurance premiums, and even job applications in some industries.
What is a Good FICO Score?
FICO considers a good score that lies between 670 and 739 based on the information from the FICO website that states that a score between 580 and 669 is what is considered a fair CS. While 740 and 799 are what are considered very good credit scores. Also, if the CS range is over 800 is considered exceptional.
Based on FICO, an average CS in 2021 was 716 and it falls into the category of a good score. The information that determines your CS is from three major credit reporting bureaus which include TransUnion, Equifax, and Experian.
What is a Good VantageScore?
FICO competitor which is VantageScore has the same CS range and uses the same credit report data from TransUnion, Equifax, and Experian. For VantageScore, what is considered a good credit lies between 661 and 780 which the company identifies as a prime credit tier. Above 780 is considered superprime and score range between 601 and 660 is called near prime and below 600 is considered subprime. As of 2021 the average VantageScore 3.0 was 693.
Why is a Good Credit Score Important?
A good CS is so important because it provides you with a lot of benefits for financial transactions. A good credit score that gets you what a bad credit can’t which includes qualification to borrow money and also help in reducing the interest rate.
As a beginner, having good credit allows you to access more credit card benefits and options. It actually doesn’t matter if your score moves to an excellent range score, you instantly have access to more card possibilities. As a matter of fact, the best rewards card qualification includes good to excellent credit.
Another reason why you need to have a good CS is that you have access to enjoy lower interest rates. Most credit cards come with variable interest rates that range between the line from 13 percent to 26 percent. You can know your assigned internet rate not until you have been approved, but with a good score, you can use that to determine whether or not you have a high or low rate.
Likewise, your credit score determines whether you’ll be approved for a loan including a home mortgage or car loan, and also the interest rate you might encounter. But with a good to excellent CS, you don’t need to worry about that.
Benefits of Having a Good Credit Score:
Maintaining a good credit score offers several advantages:
- Lower Interest Rates: With a good CS, you are more likely to qualify for loans and credit cards with lower interest rates, saving you money in the long run.
- Higher Credit Limits: Lenders are more willing to extend higher credit limits to individuals with good credit scores, giving you more flexibility in managing your finances.
- Easier Approval: A good CS increases your chances of getting approved for rental applications, insurance policies, and even job offers that require a thorough background check.
- Negotiating Power: With a good CS, you can negotiate better terms and conditions for loans and other financial products, potentially saving you even more money.
Tips to Improve Your Credit Score:
If your credit score is not where you want it to be, there are steps you can take to improve it:
- Pay Bills on Time: Ensure all your bills, including credit card payments and loan installments, are paid on time to establish a positive payment history.
- Reduce Credit Card Balances: Aim to keep your credit card balances below 30% of your available credit to demonstrate responsible credit utilization.
- Avoid Closing Credit Accounts: Closing old credit accounts may impact the length of your credit history. Instead, keep them open and use them occasionally to maintain a healthy credit mix.
- Monitor Your Credit Report: Regularly review your credit report for any errors or discrepancies that could be negatively affecting your CS. Dispute any inaccuracies to have them corrected.
- Limit New Credit Applications: Be cautious when applying for new credit, as each application can result in a temporary dip in your CS. Apply only when necessary.
Frequently Asked Questions on What is a Good Credit Score?
What is a good credit score to buy house?
According to reports, this depends on the type of loan you’re applying for. For conventional loan requirements, the CS is 620 or higher. If your credit is below 620, you won’t be approved for the loan or it might come with a higher interest rate if you choose to apply for it.
While for the FHA loan requirement is 580, the VA loan requirement is at least 580, and for USDA credit score to buy a house is 640.
How often is a credit score updated?
Based on the question “How often is a CS updated” it takes every 45 days or a month for your credit score to update. However, your credit reports are updated from recent information provided by lenders to the nationwide credit reporting agencies.
What is a very good credit score?
Generally, a very good credit score lies between 740 and 799, and from 800 and up is considered very very good or excellent credit. But good credit is between 670 to 739 and below 699 is considered fair or bad.
What is a good credit score with Equifax?
Yes, good credit with Equifax is considered between 670 to 739, and from 740 to 799 are considered very good and 800 and up is excellent credit.