People often wonder what number counts as a good credit score. According to Fair Isaac, the inventors of the FICO score, the average American credit score is 723. Surprisingly enough, however, this is not considered to be an average or good score but is actually an excellent one.
Most financial literature published since the year 2000 considers any score of 620 or above to be a good credit score. Since the financial crisis of 2009, however, this is not really an accurate statement any longer. Lending standards have tightened up considerably in practice, even if they remain the same on paper.
What is a good credit score?
As a result, the answer to the question of what is a good credit score is now something around 680 as the current baseline, and 700 is even more acceptable. Of course, credit gets used for multiple purposes. A score that is good enough to land a new car or a credit card may not be enough to qualify for a house. As a result, good credit is also somewhat situational in nature.
You may not even realize that your credit is substandard. It is possible to have a lower score and still get all the credit you have ever asked for. This may translate into higher rates, or it can also mean that you have had credit cards for years but never got around to using other types of credit, such as car loans or home mortgages.
If you do not meet the standards of an average credit user, seeking the advice of a professional credit expert can help you punch up your numbers. They are likely to recommend some variation of the following remedies.
Steps that you can take to raise your credit score
• The first step is to get hold of your credit report, and check for false information. This happens more often than you realize. Do it yourself.
• Do not employ the services of a middleman. Your credit report is secret information that you should entrust to no one who does not absolutely need to see it. Identity theft is frequently a crime of opportunity. Give the fewest number of people an opportunity to rip you off.
• Assuming that all of the information in the report is valid, the next step is to flag items that may be harming your score even though they are correct. One of the biggest detriments comes from using too much of the credit line on your card. Pay it down as far as you can manage.
• A single late payment is not a huge issue, but multiple occurrences hurt a score considerably. Be on time with every payment. Take whatever drastic steps are necessary to keep your record clean. Not only are you more likely to be approved for additional credit, but it can also lead to lower interest rates.
• In the credit business, different is good. Make sure you have several different types of loans and lines of credit. The more different types you have, the better credit agencies like it.
• Conversely, too much is bad. This seems to offer a contradiction, particularly when it comes from people who are in the business of loaning out money. Still, it is true that having a dozen, different credit cards in our wallet may look cool to your friends, but the companies do not think as highly of it. Too many accounts, particularly of a single type of credit, are actually a drag on your score.
While there is no specific magic number that equates to a good credit score, all good scores have these same principles in mind. Different companies have their own standards of what constitutes good, but the best working definition of a good score is to have a credit rating where you do not sweat being approved for anything for which you apply.
Take it from the credit expert, be smart and be on time. That is what a good credit score is all about.
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