Have you ever wondered what a good credit score is? Do you know why this 3-digit number is so important to the financial well-being of million people in the US? Does it really affect our everyday life? In this guide, we will give you the answers to these questions.
In general, a credit score is merely a single 3-digit number which indicates how trustworthy a citizen is from the point of view of a lender. If you have not proved yourself trustworthy, the credit score would be low. And conversely, if you can show yourself reliable repeatedly by paying bills and debt on time, the credit score should be high.
Who measures a credit score?
The credit score in the United States is measured by a small group of agencies that are called “credit reporting company.” They are in charge of collecting necessary information about every of your financial activity and behavior. These companies achieve this by exchanging transaction information with firms that provide financial services, such as credit cards and loans. In general, they will pay attention to three critical factors:
- The amount of money that you have borrowed
- The amount of money that you owe
- Whether you have made your payments
The agencies gather the information from everyone that you are indebted to and then make an overview of your trustworthiness regarding credit. Currently, there are 3 main agencies in the US that are engaged in determining the credit score: TransUnion, Equifax, and Experian.
The 2 most commonly used credit scores are issued by VantageScore and FICO with a range from 300 to 850 points. Here is a quick overview of what is considered as a poor, fair, good, and excellent credit score:
– 300 to 650 points: bad credit
A credit score of 650 points is often regarded as the dividing point between subprime and prime. This means that it is the point at which a lender considers you at greater risk. If you have a low credit score (no more than 650), it might be a hard time to qualify for credit cards or loans. In some cases, you might need to pay a higher interest rate than usual.
– 651 to 700 points: fair credit
The average FICO credit score in the US was 690 in 2016, an all-time high. Therefore, a score of 690 will get you to approximately the 50th percentile on the national level.
– 701 to 759 points: good credit
If your credit score falls in this range, it is easy to get approval for whatever you apply for. However, there is no guarantee that you will have the best deal that the lenders have to offer.
– More than 760 points: excellent credit
A score of 730 is enough to have the best interest rate on a house loan. However, you need an excellent credit score to get best mortgage rate. At this level, you can have the best possible deals at any lending environments and companies that you want to apply for.
If you need help with fixing your credit score, consult with Blue Water Credit Las Vegas.