Consider this scenario… you are at a car dealership shopping through the car lot because you are set on purchasing a new car. You have your money down amount in hand and now you are ready to sit down with the cars salesman to discuss financing. The first thing that is required for submission is your credit background so that the car salesman can check your credit score. You are among the few individuals who know your credit score, but you are unsure if your credit score is high enough to successfully receive financing for your new car. Now you are stuck asking yourself what is a good credit score?
For some people, the only aspect of finances that is actually understood is to know how to deposit and withdraw money from a banking account. A lot of people are aware of credit and the incentives that usually come with having good credit as well. But what is a good credit score? Keep reading for information on obtaining your credit score and knowing exactly what a good credit score is.
Credit Score Facts
Just in case you are unsure about what a good credit score is, here are a few pointers that should clear up exactly what a credit score is for and what it means.
- A credit score is also known as FICO scores.
- A credit score is comprised of 3 separate scores each from a differing credit reporting bureau.
- The 3 credit bureaus are Experian, TransUnion, and Equifax.
- Your credit score includes all of your financial history and present financial situations that relate to credit. Inclusions are credit and debit cards, banking information, loans, and bankruptcy.
- A bad credit score can prevent you from taking out loans, starting a bank account, owning a credit card, owning a home, purchasing a car, and even getting a job.
Getting a Good Credit Score
Now you may be asking, what is a good credit score? In terms of numbers, the highest credit score you can possibly receive is 850. The lowest credit score you can receive is 300. If you do not have an 850, do not be too disappointed. Having a credit score of 850 is very rare and with the economy in a continuous fluctuation, that score will probably never grace the credit report of any individual. To have a perfect credit score would mean having a perfect group of financial factors, not just having a lack of delinquent loans and negative balances.
So what is a good credit score? Companies that must consider credit score before going any further in a business transaction are happy to see a client with a credit score starting at 760. With a score of 760 or above, you are guaranteed to get the best rates and credit opportunities that lenders have to offer.
Consider the Numbers
So now that you have the answer to what is a good credit score, do not get too disappointed if your credit score is less than that. You may be in the normal credit score range of the majority of the population. Getting a 760 credit score can present a difficult task as well and there is statistical proof to show that good credit scores are sort of hard to come by. Individuals between the ages 25 and 34 have an average credit score of 628; by the time those individuals reach ages 45 to 54, their credit score increases to 647 and to 697 by the age of 55 and over.
Good Depends on the Purpose
Again, consider the question what is a good credit score? The definition of a good credit score does not just rely on the credit score itself, but also on the purpose of having the credit score considered. A good credit score for a loan may range differently than one for a credit card. For example, to qualify for a conventional mortgage loan, you are more likely to be approved with a credit score above 620; one the other hand, to qualify for an FHA loan, you may only need a credit score of a 500 or above. Just keep in mind that just because you credit score is not good enough for one situation does not mean that it will not suffice for another situation.
From Bad to Good
If you have a bad credit score, here are some ways to build your credit toward a better score:
- Use credit only for convenience. If you do have to put it on credit, do not do it.
- Make payments on time. If you must use credit, make sure to pay your debt in full amounts and on time.
- Get rid of your debt. Even if it happens at a slow rate, make sure to clear up your debts.
- Save, save, and save some more! Having back up finances will come in handy in case of emergencies.
A good credit score may be hard to come by, but understanding what it means to have a good credit score will put you on the right track to getting your finances in order.