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What Is A Good Credit Score?

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Planning to borrow money anytime soon or in the not-so-distant future? You will need to know what the credit score is, why it is essential and what is a good credit score. Once you get into the finance and credit play, you’ll need to learn how to maintain your good credit reputation. For this, you first need to understand the basics and background of the credit essentials like credit scores. This article will establish what is a good credit score by discussing what makes up a good credit score, how is it affected and how to check your scores and report.

The Credit score is a tool used by the lenders and financial institutions to evaluate you for a particular credit or loan. It is an indicator of an individual’s creditworthiness that is based upon the credit history and records. Using your credit reports and additional documents when applying, lenders calculate a score that portrays your credit value. They then use this mathematically computed score to analyze the risk when lending you. With this three-digit figure, they judge how serious and promising you will be concerning your credit obligations. This shows how conscious you should be to maintain a good credit score. The importance given to good credit scores has given rise to different credit repair companies too. These companies solely focus on keeping up a good credit score for you and save you in case of poor credit.

Credit Scoring Models:

The credit bureaus use the credit scoring models to analyze your worthiness to receive a loan. The person’s payment patterns and balances indicate the characteristics that these credit agencies use and analyze to build a credit score. The credit score can be calculated from the following factors, details of which will be highlighted in the upcoming section.

A weight is assigned to each one of the stated factors and the relevant experts analyze the credit score based on these factors. Lenders use credit scores to assess the risk involved in lending, terms of the loan and the interest rate. There are different credit score models which are based on multiple factors.

        Known for 25 years, the FICO Scoring Model created by Fair Isaac Corporation is the most commonly used credit scoring model. However, the gradual changes in credit-granting requirements by lenders, data reporting practices, consumer credit demand, and consumer credit use evolved this model. Thus, adequate revisions in this scoring model from time to time help in determining the credit score accurately. The table below highlights the different variations and amendments in the FICO scoring model.

The studies carried out in 2016 have declared FICO Score 8 as the most commonly used model. The latest scoring model is FICO 9 which occupied the screens in 2014. The significant difference in the FICO 9 model is that it puts less weight on unpaid medical bills.

FICO Model- What Constitutes Credit Score?

No matter what variation is used, the classic FICO model relies on five factors that constitute and influence your credit score. The diagram below shows the five chunks of your credit score (as mentioned above) are shown in the diagram below



#1. Payment History

Your payment history accounts for the most substantial chunk, taking up 35% of credit score. This shows

The higher the proportion of on-time payments, the higher your credit scores will be. The later the payments, the more your score gets penalized.

#2. Credit Utilization Rate (Current loan and credit card debt)

        This is based on the entire amount you owe. Credit Utilization accounts for how many and what types of accounts you have. It also considers the percentage of money owed compared to how much credit you have available, known as credit utilization. The secret tip is to avoid spending close to your credit limit, even if you pay your bills timely. That’s because the credit cards that level off and reap no benefit will lower your credit score. However, smaller balances can raise them.

#3. Length of Credit History

        Your credit history makes up 15% of your credit score. The tip to excel for a loan is to apply for a loan frequently but wisely. Paying off well in time is equally significant wherever you stand. The reason is that the longer credit histories are perceived as less risky. The lenders have more data to determine the reliability of the lender. And the longer credit histories portray how well you have been managing your loans and debts in the past. So do borrow, but prudently!

#4. New Credit Activity

        Your recent credit activity is worth 10% of your FICO score. There is absolutely no harm in applying for new credit card, but be cautious in this decision. If you apply for multiple cards at the same time, this might signal you’re using one card to pay off the burden of another card, and this poses an extremely negative impression. The same concept holds for when you think of applying for different loans simultaneously. Consider scheduling the same lends over longer and different time spans, it won’t harm your score in the long run.

#5. Account Types

       The credit you use contributes to the last 10% of your FICO score. This factor determines how many different forms of credit you have, for example, credit cards, auto loans or mortgage loans, etc. Having a healthy mix of accounts is likely to impact your credit scores positively. Don’t, however, rush for having too many different kinds of credits rapidly. This may signal your frantic credit behavior which is highly unappreciated.

Vantage Scoring Model:

Another consumer credit-scoring model showed up back in 2006 as a result of the joint venture of three major credit bureaus, Experian, Equifax, and TransUnion. An independent company VantageScore Solutions manages the Vantage Scoring Model. This model seeks to investigate the certain data items from the credit files maintained by the three credit reporting agencies. Factors like on-time payments, maintaining low balances of credit cards, avoiding new credit obligations, bank accounts, and other assets contribute to the analysis and making up of a credit score. What makes it different from the FICO scoring is a “single model” to use the information from all three bureaus.  The Vantage model uses more or less the same factors as used in FICO, but weighs the factors differently. This makes the scores from both models similar, but hardly ever identical.


Other Scoring Models, not very commonly used include:


Credit Score Range:

Understanding credit score ranges has gained huge significance. You might be confused by having multiple credit scores. Despite these mix-ups, it is essential to know where you fall on a credit score range and what to interpret from it. So it’s worth understanding what a credit score range is and why it matters to you. While there are other scoring methods available, the FICO scoring model is by far the most commonly and widely used.  Lenders usually use the three-digit credit score figure to help them in their lending decisions. Generally, the higher the scores, the more you are likely to qualify for a loan. Besides, a good credit score saves you on interest rates too. But to decide what is a good credit score, you first must be aware of the credit score range.



The credit score generally ranges from 300 being at the lower end to 850 at the higher end. The higher, the better. lower, the riskier you are as a lender. Now, What is a good credit score? This question has no definite answer. A credit score of 700 or above is considered good. For having an exceptional credit value, your scores should lie between 750 and 850. Studies show that 66% of Americans fall in the good or fair credit score range. Keep in mind that the actual ‘good’ credit score depends on the nature of your lender and what you’re borrowing. Different lenders perceive the credit score and credit value differently. While experts suggest maintaining a high score, they also mention considering such factors to maintain your scores. The table below portrays how falling in different score ranges impact you and your credit.


Credit ScoreRating% of PeopleImpact
300-579Very Poor17%Credit applicants may be required to pay a fee or deposit, and applicants with this rating may not be approved for credit at all.

Fair20.2%Applicants with scores in this range are considered to be subprime borrowers.

Good21.5%Only 8% of applicants in this score range are likely to become seriously delinquent in the future.

Very Good18.2%Applicants with scores here are likely to receive better than average rates from lenders.

Exceptional19.9%Applicants with scores in this range are at the top of the list for the best rates from lenders.

Different models have different credit score range and criteria. This conveys that different credit scores represent a different meaning, depending on what model a lender uses. A VantageScore 3.0 score regards say ‘661’ a good score, while a 661 FICO score may be considered just fair. A specific credit score doesn’t always guarantee you credit approvals or attractive interest rates.

But knowing where you stand may help you decide what to apply for, or which areas to improve before applying.

What Affects Credit Score?

        The answer to this question rests on the scoring model you employ. What makes up your credit score is generally what affects it. While different scoring models have different elements, this section explains some most common factors that impact the credit scores.

Most Important: Payment History

        Your payment history for loans and credit cards makes up the largest chunk of your credit score. Hence it is the chief factor to impact your credit score at the earliest. It affected your scores positively if you pay all the bills in time. Every late payment will hurt your credit score.

Very Important: Credit Utilization Rate

        Credit usage is one of the few factors you can use to improve or harm your score. It is the ratio of the amount of credit you are using to the amount of total credit you have.

        Credit Utilization Rate =  Your Total Debt / Your Total Available Credit

A low ratio depicts your good loan management capabilities. An acceptable ratio is 30% or less as many lenders say. Hence try managing the credit limit you are using well, so it poses a positive effect on your score.

Somewhat Important: Length of Credit History

     The concept of judging the future behavior based on the past data is employed here too. The length of credit history accounts for multiple factors like:

A long credit history with well-managed payment records is a key to appear attractive to lenders. Opening a new account disturbs your average age of accounts, thereby lowering your score. Old accounts appear on your credit reports for good 10 years but harm your score once they drop off.

Slightly Important: Credit Mix

        Attractive credit is made up of a variety of credit account types. FICO’s Research has found that;

“other things being equal, consumers with a ‘mix’ of credit types on their credit reports are assumed less risky than those who have experience with only one type of credit.”

The tip is to manage multiple credit forms, but don’t forget that “timely payments” is the secret to credit success.

Two Important But Neglected Factors:

#1. Negative Accounts

        Credit reports sometimes contain negative accounts which pose considerable damage to your scores and credit value. This era of fraud and cheating has made identity theft very common. If someone opens fake accounts in your name, not only your scores lower but your overall reputation is also disturbed. To avoid this, the “Deletion Experts” serve you by analyzing your credit reports for FREE and deleting those negative accounts.

#2. Hard Inquiries

        Every time you request for credit, the lender checks your credit report. And every time the lender checks your credit, it pulls a hard inquiry on your report. These hard inquiries lower your credit scores significantly. Although some hard inquiries diminish on their own with time, there are some that stay for 6 to 7 years. Hence it is essential to hire a legitimate company for inquiry removal. Inquiry Busters is an efficient company that analyzes your credit reports for free and removes hard inquiries in a breeze.



How do I Check My Credit Score?

        Each credit agency used a different method to calculate the credit score. That means there is no single magic number you can rely on. Whatever the model or score number, the rule of thumb is the same- higher scores, lower risks. To keep a striking credit track, you need to access and review the free credit report provided by many financial companies. The Federal law has legally stated the consumer’s right to a free credit report annually from each credit reporting agency.  

        What needs to be noted here is that viewing and reviewing ‘credit report’ doesn’t give you an access to the ‘credit score.’ The three credit reporting agencies provide three varying credit scores. That’s because of the scoring models and techniques they use.

There are three common ways you can use to check your credit scores:

#1. Direct Purchase

The most appropriate option is to purchase your scores directly from the three credit reporting agencies. Other than that, MyFico is an authorized credit score generator.

#2. Financial Institution

Many credit card companies, banks, and financial institutions have begun providing scores to the customers. You can view them online or on your financial statements.

#3. Credit Score Service

Different sites are providing free credit score checking services to their clients. They can use these online tools to know their score



Your credit score is a tool used by the lenders to assess your credit value and your credit management abilities. To have the desired loan, you must work on your credit scores. This article has attempted to sum up what is a good credit score and why it matters so much. It is worth noting that every lender follows a different policy for credit scoring. If you don’t meet the criteria of one lender, you may still be able to qualify for some other lender. However, if you are refused for credit, find out the reason for rejection before making another application. You might identify any key area where you lack and need improvement. Be aware that lenders construe too many credit searches in a short time negatively. It is YOUR financial actions that contribute to the positive or negative changes in your credit score. This article has inferred that there is no perfect recipe for a ‘good’ credit score. Keep your actions in keen consideration, and you’ll find out what makes up a good credit score.



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