What’s a Good Credit Score?

Whats a good credit score?

Your credit score is incredibly important. In fact, this number is so influential on various financial aspects of life that it can determine your eligibility to be approved for credit cards, car loans, home mortgages, apartment rentals, and even certain jobs. Knowing what your credit score is, and what range it falls under, is important so you can decide what loans you can to apply for, and if necessary, if steps need to be taken to improve your score.

So what constitutes a good credit score?

The Credit Score Range Scale

The most common credit score used by lenders and other business entities is the FICO score, which ranges from 300 to 850. The bigger the number, the better. To create credit scores, FICO uses information from one of the three major credit bureau agencies – Equifax, Experian or TransUnion. Knowing this range is important because it will help you understand where your specific number fits in.

Know what factors influence a good credit score to help improve your own credit health.

As far as lenders are concerned, the lower a consumer’s number on this scale, the higher the risk. Lenders will often deny a loan application for those with a lower credit score because of this risk. If they do approve a loan application, they’ll make consumers pay for such risk by means of a much higher interest rate.

Understand Your Credit Score

Within the credit score range are different categories, ranging from bad to excellent. Here is how credit score ranges are broken down:

Bad credit: 630 or Lower

Lenders generally consider a credit score of 630 or lower as bad credit. A number of past activities could have landed you in this category, including a string of late or missed credit card payments, maxed out credit cards, or even bankruptcy. Younger people who have no credit history will probably find themselves in this category until they have had time to develop their credit. If you’re in this bracket, you’ll be faced with higher interest rates and fees, and your selection of credit cards will be restricted.

Whats a good credit score?

Fair Credit: 630-689

This is considered an average score. Lingering within this range is most likely the result of having too much “bad” debt, such as high credit card debt that’s grazing the limit. Within this bracket, lenders will have a harder time trusting you with their loan.

Good Credit: 690-719

Having a credit score within this range will afford you more choices when it comes to credit cards, an easier time getting approved for various loans, and being charged much lower interest rates on such loans.

Excellent Credit: 720-850

Consider your credit score excellent if your number falls within this bracket. You’ll be able to take advantage of all the fringe benefits that come with credit cards, and will almost certainly be approved for loans at the lowest interest rates possible.

Understand the factors that make up a good credit score.

Whats a good credit score?

What’s Your Credit Score?

Federal law allows consumers to check their credit score for free once every 12 months. But if you want to check more often than this, a fee is typically charged. Luckily, there are other avenues to take to check your credit score.

Mint has recently launched an online tool that allows you to check your credit score for free without the need for a credit card. Here you’ll be able to learn the different components that affect your score, and how you can improve it.

You’ll be able to see your score with your other accounts to give you a complete picture of your finances. Knowing what your credit score is can help determine if you need to improve it to help you get the things you need or want. Visit Mint.com to find out more about how you can access your credit score – for free.

Lisa Simonelli Rennie is a freelance web content creator who enjoys writing on all sorts of topics, including personal finance, investing in stocks, mortgages, real estate investments, and anything else to do with the world of economics.

The post What’s a Good Credit Score? appeared first on MintLife Blog.

Source: mint.intuit.com

National Get Smart About Credit Day

Depending on the time period in which you were raised, many young children and adolescents had differing opinions (and ideals) about what credit was and how it should or shouldn’t be utilized. While some were privileged enough to understand the complexities and importance of credit, others had to learn at the expense of their own mistakes along the way. No matter where you were or where you are currently, luckily there are always actionable steps that can be taken to clean up, improve, and get smart about your credit – let’s explore. 

Become familiar with what can impact your credit 

There are five key components that are factored into your credit score. 

Payment history 

Your ability to make timely payments plays a huge role in your credit score. Lenders want to have the confidence that you as the borrower are capable of paying back any debts on time. If there is ever a situation that can impact your payment history, it’s best to notify your lender as soon as possible to avoid any negative remarks on your credit report.  

Credit utilization 

In order to determine your credit utilization rate, divide the amount of credit currently in use by the amount of credit you have available. For the best possible scores, keep this percentage under 30%. This shows creditors you have the ability to manage debt wisely. To optimize and improve your score, make it a goal to utilize less than 10% if possible.   

Length of credit history  

Lenders will take an account of all creditors and the length of time each account has been open. In order to improve this average, try your best not to close any accounts as this can have the potential to decrease your overall credit score.  

Credit mix  

Car, student loan debt, mortgage, and credit cards are all varying types of revolving and installment loans. Lenders view this as favorable when you’re able to manage different types of credit. A good rule of thumb for using a credit card is charging a small amount each month and paying it off in full to avoid any interest payments. Not only does this impact your score positively, but it also creates good habits that don’t require you to solely rely on credit cards for purchases.  

New credit 

Any time you apply for credit, you’re giving lenders the right to obtain copies of your credit report from a credit bureau. Soft inquiries do not have an impact on your score, such as pulling your own credit report or a potential employer pulling your report as a part of the screening process. Applying for a new credit card, requesting a credit limit increase, financing a car, or purchasing a home are all examples of hard inquiries. For processes such as auto purchases, student loans, or mortgages these are typically treated as a single inquiry if done within a short scope of time such as thirty days. Be mindful of the number of inquiries outside of these scenarios – this mainly relates to retail store credit cards. Inquiries have a greater impact if you have a short credit history or a limited amount of active credit accounts.   

Review your credit reports and dispute errors if necessary 

Carve out some time to obtain a free credit report from one of the three credit bureaus (Experian, TransUnion or Equifax) to review. Familiarize yourself with everything that is listed. In the instance something doesn’t appear correct, follow the proper protocols to dispute errors. Completing this exercise at least once a year after initially cleaning up any errors can help correct any mistakes, but also ensures accuracy. The credit reporting agency and the lender must be contacted in order to jumpstart the process of resolution. Even in the instance, there are no issues found, you’ll have peace of mind knowing the due diligence has been done.  

Communicate and be honest with all creditors 

If you are experiencing any type of financial hardships due to unforeseen circumstances, make it a priority to communicate upfront with all creditors. Explaining your personal situation while proposing reasonable solutions may work in your favor. Refrain from avoiding creditors due to emotional reasons or negative thoughts; your pride cannot overshadow your personal needs. When discussing finances, most of us don’t want to disclose any personal information – however, if this can result in bettering your personal finance journey and credit score simultaneously; there’s no way to lose. Make your requests known and be proactive so the best solutions can be provided.  

Create a plan and remain completely committed 

Commit to at least three goals that relate to improving your credit. This could simply start with paying all of your bills on time and regularly checking in with creditors to ensure good standing. If credit card spending is a challenge for you, commit to limiting your credit card usage while paying more than the minimum balance. Rally the assistance of your family and friends to serve as your accountability partners to make sure you achieve your goals. No matter the personal goals you decide to set, commit to staying the course. Often times our personal lack of patience leads us to believe that the hard work that’s being put forth is in vain. If nothing else, commit to improving your credit for you and your families’ wellbeing.  

Protect your hard work (and your credit) 

Once your new credit score emerges and is here to stay, the first order of business is to celebrate – congratulations! Your hard work and dedication have indeed paid off. In order to make sure your credit score stays in tip-top shape, don’t be too quick to take your foot off of the gas just yet! Be sure to stay informed about any tactics or strategies to keep your credit score in the best shape possible. We’re all on our phones throughout the day, so make it a regular occurrence to do a quick internet search on ways to improve your credit score. Continually staying educated about various credit improvement opportunities  

The post National Get Smart About Credit Day appeared first on MintLife Blog.

Source: mint.intuit.com