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What is a Good Credit Score?

Having a good credit score can open up opportunities for you in all walks of life – from qualifying for lower interest rates to moving into your dream apartment. In this article we’ll cover the range of credit scores, why a good credit score is important, and steps you can take to improve your credit score. So, what is a good credit score?

What is a good credit score?

Based on the commonly used score range of 300 to 850, a score of 658 to 719 is generally considered to be a “good credit score” and a score above that range would be considered “very good” or “excellent.”

In practice, every lender sets their own parameters for what constitutes a “good credit score” and may also have more specific cut-offs or requirements for a particular product or service. As a result, a specific score doesn’t guarantee you’ll be approved for credit or receive the best rates, but aiming for a higher score will increase the likelihood that you’ll be offered the best terms.

If you feel that your score isn’t as high as you’d like, check out these 5 tips on how to get an excellent credit score.

A good credit score isn’t just about shooting for the best number – a good score can help you access more opportunities and better rates, potentially saving you thousands of dollars in interest or finance charges.

What do you get with a good score?

Over the course of your lifetime, there will be a variety of scenarios where businesses and people will rely on your credit score to help them decide if you’re a good person to do business with and what kinds of rates or terms you qualify for. Your credit score isn’t just important if you’re applying for credit – even a prospective employer may check your credit score and your credit history before making you a job offer. Having a good credit score can open the door to more opportunities and savings. Here are just a few examples of what a good credit score can help you get:

  • An unsecured personal loan or credit card
  • A great apartment without a hefty deposit
  • A mortgage or car loan with attractive terms

Sounds great, right? So, what does it take to get a good credit score?

What goes into a good credit score?

Most people have different credit scores that differ slightly because there are multiple credit bureaus, and your credit information may be reported and updated at the bureaus at different times. Just like there are multiple credit bureaus, there are multiple scoring models. The two most common scoring models used to calculate credit scores are FICO Score and VantageScore.

Although the proprietary scoring models behind FICO and VantageScore differ, the top factors that impact your credit score are generally the same, and it pays to understand the breakdown of these factors and what it takes to get a good credit score.

Payment History

Your payment history is generally the most heavily weighted factor driving your credit score because it shows lenders that you have been reliable in making consistent, on-time payments. This is an indicator that you can responsibly handle your debts and your repayment obligations. Who wouldn’t want to do business with someone who is good at repaying money they’ve borrowed?

In order to get a good credit score, an excellent payment history is key. Even one or two missed payments can seriously ding your credit score. Consider using some easy tricks, like setting up automatic payments or online alerts, to help you keep track of your bills and remove the risk of accidently missing a payment.

Credit Utilization

Credit utilization measures the amount of your overall credit card limit that you’re using. A high credit utilization ratio signals to lenders that you may be overextended and may not be able to handle any additional credit.

Keeping your credit utilization ratio below 30% is key1 if your goal is a good credit score, and the lower you can go, the more it can boost your score. Learn more about how to calculate your credit utilization ratio. If your credit utilization ratio is above 30%, it may be holding you back from achieving the good credit score you want. Check out different strategies for paying off debt, or consider a debt consolidation loan to help streamline your monthly payments and make progress on reducing your outstanding balances.

Age of Credit

Establishing a long credit history usually helps your credit score, as long as you have a consistent history of on-time payments. Specific factors that go into your score include how long your credit accounts have been open (the age of your oldest account, the age of your newest account, and average age of all your accounts), how long specific accounts have been established, and how long it’s been since you used each account.

In order to get a good credit score, you generally need at a few years of credit history. You can’t change when you opened your first credit card but keeping your older card open could help (unless you’re paying high fees or you find that you’re racking up too much debt). Closing your first credit card could mean shortening your credit history and reducing your available credit, which could lower your credit score. If you’re just getting started, here are some tips to build your credit from scratch.

Credit Mix

The number and mix of credit accounts that you have in use – credit cards, auto and student loans, mortgages and other lines of credit – all contribute to your credit score. Generally, having more open credit accounts translates into better credit scores. Why? Having more accounts means you’ve been approved for credit by more lenders. Additionally, having a diverse mix of credit across the two main categories – revolving credit and installment loans – can increase your credit score:

  • Revolving Credit: credit products such as credit cards or home equity lines of credit (HELOCs) in which you make different payments each month depending on how much credit you utilize
  • Installment Loans: loans with terms of fixed payments made over a fixed timeline with fixed rates

Hard Credit Inquiries and New Accounts

Each time someone pulls your credit report — a lender, landlord, or insurer — an inquiry is documented on your credit report. One hard inquiry is unlikely to affect your score more than a few points, but they can stay on your credit report for two years. However, many hard inquiries or opening several new lines of credit in a short period of time can be more detrimental.

Lenders who see that you have numerous recent inquiries may worry that you are applying at several places because you’re unable to qualify for credit, or that you may be desperate for money.

To get a good or great credit score, avoid applying for several lines of credit at once, and only open new accounts if you really need them.

What is not included in a credit score?

Good credit score or bad, the following information is not reported to credit bureaus and does not factor into your credit score:

  • Your race, color, religion, national origin, age, sex or marital status,
  • Your salary, occupation, title, date employed or employment history (Although not included in your credit report, lenders may consider this information in making their overall approval decisions.),
  • Your everyday spending habits.

How do you get a good credit score?

Now that we’ve covered what goes into a good score, what are some steps you can take to get a good credit score?

1. Pay on time, every time. If you have trouble keeping track of your bills, try setting up automatic payments or electronic reminders so you can avoid an accidental late payment.

2. Don’t spend up to your limit. Avoid maxing out your credit cards and pushing your credit utilization above 30%. If you have trouble reining in your spending, check out these hacks to cut back on spending, or revisit your budget.

3. Monitor your credit score and review your credit report regularly. Know where you stand and what’s influencing your score. Consider signing up for a free credit monitoring service with automatic alerts so you know when something in your profile changes and you can respond accordingly.

4. Keep old accounts open. Keeping your old accounts open can boost your score by keeping your average age of accounts as old as possible. Avoid the temptation to run up your balances!

5. Only apply for credit that you need. A few hard inquiries on your credit report won’t tank your score, but don’t make a habit out of applying for credit.

Ready to shoot for the stars? Check out these tips on how to get an excellent score.

Does anything else matter besides my score?

Of course! We are all so much more than just a 3-digit number! Most lenders and creditors consider factors that aren’t included in your credit score, or on your credit report, when they are evaluating whether or not they want to do business with you.

When you apply for credit, most lenders will ask for information beyond your credit report, such as your income, your employment history, your savings or reserves, or details about collateral. Sometimes this information is used by itself to determine eligibility. For example, an auto lender will typically require that your car has a certain resale value or a clean title.

Information from your application may be used to calculate other indicators. For example, many lenders use debt-to-income ratio, which measures how much you owe each month compared to how much you earn, to judge your ability to manage your monthly payments. Even if you have an excellent credit score, a high debt-to-income ratio suggests to lenders that you might be overextended and may have a hard time repaying additional debt.

How do I find out my credit score?

The first step to getting a good credit score is finding out where you stand. There are many places where you can get your credit score for free, including Upgrade’s Credit Health. It’s also a good idea to review your full credit report once a year and check it for accuracy (based on the Fair Credit Reporting Act, you are entitle to a free copy of your credit report once every 12 months from any of the nationwide credit reporting companies – Equifax, Experian, and Transunion). If you find that your credit score is being dragged down by inaccurate information, take steps to dispute the error.

Once you’ve established a good credit score, keep it that way! Keeping your score in good shape doesn’t have to be a huge undertaking. Check out these everyday habits and techniques you can implement to help boost or maintain your score on a daily basis. That said, don’t forget about your credit altogether. It’s important to monitor your credit score on an ongoing basis to make sure things stay on track, and if you’re ready to shoot for the stars, learn how to go from a good credit score to an excellent credit score.

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