In a previous article, we talked about how a credit score is calculated. This information is useful for maintaining or improving your credit score. Today we’re going to dive deeper into what makes a good credit score.
What Credit Score Is Considered Good?
A good credit score sometimes varies with the economy and the political environment within the U.S. A figure of 620 was considered the dividing point between a better credit score and a less desirable credit score until recent years. A slowdown in the economy and the often-tragic list of foreclosures and loan defaults have caused many lenders to raise that figure when a decision must be made on lending money. Basically, a good credit score starts around 700 today.
What Impact Does a Good Credit Score Have?
A loan on a car or a mortgage on a house are considered big-ticket items. Applying for such a loan or mortgage may be an eye-opener for many people. If the credit score the lender obtains is too low, a refusal is almost automatic. The better the credit score the lender obtains, the more negotiating room a person has for a lower interest rate.
How Can You Better Your Credit Score?
The first thing that everyone needs to do is to carefully review their credit report at least annually. If possible, pay to see the credit score at that time. Most organizations charge to reveal that score. That review should include all three of the major credit reporting organizations. If there are any errors, be sure to work to get them corrected.
Next, work at getting credit cards paid down. Most lenders expect that balance to be 25 percent or less of the maximum amount allowed on the card. Then, pay loans and a mortgage as nearly on time as possible. Avoid opening any new account as that has a negative impact on the score. Also, try to avoid authorizing a credit report inquiry as those impact your score.
If a person is working to improve a credit score, another reason to check the score each year is to watch it go up. It may take some time to improve that score, but when a diligent effort is made the score will improve.