Do you know what your credit score is? If you do not need, because a good credit score can mean a big difference in the amount of interest you pay on each type of loan you are carrying, be it a mortgage or home equity loan, your car loan, or your credit Card debt. You must find out what is considered a good score in order to make credit work for you.
How Does A Credit Score Work?
The most popular type of credit score among lenders is the FICO score. More than 80% of the banks in the United States use this type of score. Typically, you will have a separate and distinct score from each of the three main credit bureaus, which are Equifax, TransUnion, and Experian. These scores are taken strictly from the information in the file that each credit bureau keeps on you. When the information that is saved in your credit file changes, so does your FICO score.
Maybe you went car shopping one weekend and had several dealers check to see if you qualified for a car on their lot you were interested in. Maybe you took your bank up on an offer for a new bank card. Maybe you applied at two department stores for credit cards while you were at the mall. Or, maybe you are trying to buy a new home. All of these things could change your FICO score.
What Do The Numbers Mean?
A score of 850 is considered to be a perfect score, but any score which ranges between 720 and 850 will help you get the best interest rate from your lender. The lowest possible score you could have would be 300. Here is a breakdown of scores from high to low credit risk:
- 800 – Nearly Perfect Credit
- 750-800 – Excellent Credit
- 720-750 – Good to Excellent Credit
- 690-720 – Good Credit
- 620-690 – Fair Credit
- 620 – Poor Credit Risk
- Below 620 – Forget It!
What's My Score and How Can I Improve It?
To find out your credit, contact one of the three big credit bureaus listed above and get a copy of your credit report. You score will be included in the information you'll receive. If your score is lower than you would like, you can improve it by –
- Making sure all your bills are paid on time
- Do not run your credit card balance up to the maximum balance you are allowed
- Do not acquire more debt than you can comfortably handle
When you know what is considered a good credit score, you can take a hard look at your own and decide the best way to make and keep it as close to perfect as possible.