Home Finance EXPLAINED: What Is a Good Credit Score?

EXPLAINED: What Is a Good Credit Score?

Regardless of whether you are applying for a home loan, car loan, insurance plan, or a new credit card, having a favorable credit rating can get you financial products at better rates. But, what is a good credit score? Read on to know.

What Is Considered a Good FICO Score?

FICO Scores are one of the best-known types of credit score – it was created by Fair Isaac Corporation. FICO Scores are used by a number of lenders and they often range between 300 and 850. If your FICO Score is over 670, most lenders will consider it a good score. Anything that’s above 800 is considered exceptional. If your FICO Score is between 669 and 580, it is considered fair. Anything below 580 is considered very poor.

What Is a Good VantageScore?

Scores by VantageScore are another type of credit score that is commonly used by financial institutions. The VantageScore was developed by the three primary credit bureaus which include Equifax, Experian, and TransUnion. A VantageScore always falls in the range of 300 and 850. A score above 660 is considered good, and a score over 780 is considered excellent. Scores that are between 660 and 601 are considered fair, while scores between 600 and 500 are considered poor. If your score falls below 499, it’s considered very poor.

Why Does Your Credit Score Matter?

Credit scores play an important role in helping lenders decide how much to charge you for a loan. An individual who has a high credit score is considered more creditworthy and will be offered a competitive rate. In comparison, an individual with a low credit score poses more of a risk to lenders and will, hence, be charged a higher rate.

Factors that Affect Credit Scores

Your credit score is impacted by a number of factors such as your payment history, credit utilization rate, total debt, type of credit accounts, age of your credit accounts, public records like bankruptcy, and more.

How to Improve Your Credit Score

If you want to improve your credit score, the first thing you should do is keep a tab on your score. Reducing the total debt you have will help increase your credit score, and so will making your loan, credit card, and bill payments on time.

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