What is a Good Credit Score?

Your credit score is simply a snapshot of your credit use. It’s a brief overview of seven years of your borrowing history. Your credit report is the detailed rundown of your borrowing habits. Credit reports are provided by three major credit bureaus: Equifax, Experian, and TransUnion.

Using the one of the above mentioned credit reports will help you answer the question “What is a good credit score?”

How is a credit score calculated?

A credit score is a value assigned to several criteria used in making lending decisions. Criteria include the amount you owe on non-mortgage related accounts such as credit cards, your payment history, and credit history. Scorers take this information from your credit report and plug it into formulas that calculate a value representing the amount of risk you pose to a lender. That value takes into account the track record of other consumers with similar credit profiles. By looking at this value, or score, lenders are able to roughly gage whether it’s a good idea to extend you credit.

What is a good credit score?
Your credit report score is based on a formula developed by Fair, Isaac & Co. (FICO) or a handful of other credit reporting agencies on a scale ranging from 300 – 850. The higher the score the better.

What is a good credit score and how can I improve my credit score?

    1. Check your credit history for errors. It’s a good idea to make sure that the data each bureau has on you is consistent and up to date by ordering a copy of your credit report about once a year and disputing any inaccuracies.
    2. Pay your bills on time. Late payments will work against you, so it is important to make all loan payments on time even if it means only paying the minimum balance. Apart from extreme circumstances like tax liens or bankruptcy (which can remain on your credit report for as long as 10 years) nothing has as big of an impact on your credit history as late payments.
    3. Don’t max out your credit cards! You should avoid “maxing out” your credit lines and strive to maintain low balances. If your cards are maxed out, lenders may assume that you have trouble managing your finances.
    4. Don’t apply for too much credit in a short amount of time. People tend to get nervous when they receive credit card solicitations in the mail. Scorers treat these solicitations as “spot” inquiries, which do not affect your score. Whenever you apply for credit, on the other hand, it’s treated as a “hard inquiry” that’s factored into your score. Too many inquiries over too short a time can have a negative impact on your credit score.
    5. Setup payment reminders. As mentioned above, paying your bills on time is one of the biggest contributing factors to your credit score. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and local providers to have payments automatically debited from your bank account. Keep in mind that this only makes the minimum payment on your credit cards and doesn’t help instill a sense of money management.

Credit Repair Tools:

Conclusion

What is a good credit score? The answer varies. However following the above improvements should will help raise your credit score over time.

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