What's a Good Credit Score?
By Louis Z.
In light of the recent changes in the economic climate, many people are keeping
a close eye on their credit score. Lenders are becoming much more cautious about
who they are approving for any type of loan and the credit scores are becoming
more important than ever. However, it's hard to know what's a good credit score.
Many experts don't even agree, so how can you wade through it all and come out
ahead?
The credit score range is between 300 and 900, depending on the ratings agency
and who is doing the reporting. Of course, the low numbers are bad while the
higher ratings are more desirable. These numbers are calculated by looking at
the rate of default that appears in your personal financial history. The better
your record, the better your score. Most Americans have a FICO score of over
750. Another large group falls between 650-750. Together, about 60% of current
records fall within this range. To make this easy to understand, people with
credit score ratings of at least 700 only have a 5% chance of defaulting on a
loan and are considered a good risk. With a score of 650+, that chance jumps to
15%. While that used to be good enough for many lenders, the financial market is
demanding better odds and your chances of obtaining a loan are going to be much
better if your score is above 700.
Now that you know what's a good credit score, you can get a better picture of
what you need to do to qualify for your loan. Besides the score, you need to be
financially stable. A good score won't carry the day if you are out of a job or
have a high debt load, for example. In fact, after the score, your debt to
income ratio is the biggest thing a lender will look at. Pay down debt such as
credit cards as quickly as possible and be prepared to show secure employment
records. Also, request the free credit score info so you'll know exactly where
you sit.
If you have been as hard hit as many people in this economic crunch, you likely
need help getting your credit score up. Banks are seeing thousands of previously
sound accounts defaulting for the first time, so you are not alone. The first
thing you need to know is to avoid bankruptcy, as it has the worst effect on
your credit score. Instead, put every extra penny you have into liquidating your
debt. Many companies are working with clients with special programs and payment
plans to make that happen. As you pay of your accounts, don't close them. Older
accounts have more history and reflect better on your rating. It's also possible
to take a settlement. This will reflect on your credit score, but with time and
effort, you can repair the damage that has been done. Use this as a learning
experience and a jumping off point. After your accounts are cleared, put the
cards away and use cash only. The open accounts will show little to no debt,
creating a better rating and you will also be learning the discipline necessary
for long term financial success.
It's not difficult to understand what's a good credit score. However, it can be
hard to fix a bad one. Like your social security number, you credit score
follows you throughout your life and should be guarded as closely as possible.
It's always easier to avoid damage in the first place than to fix it after the
fact, but it can be done with time and effort.
Find out more about what's a good
credit score
range as well as useful information on how you can
calculate
credit score at ezcreditscoring.com.
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