What Is A Good Credit Score

Your Credit Scores are used by anyone loaning you money. Credit card companies, home equity lenders, auto loan lenders and finance companies all use a model created by Fair, Isaac and Co, the San Rafael, California company that pioneered credit scoring 40 years ago and dominates the field today. These credit scores are most often known as FICO and serves as a snapshot of your credit history.

• Low credit scores can raise the price of your loan and a very low credit scores can

mean denial of your loan completely. Here are the approximate percentages that determine your FICO credit scores.

• Payment history (35%). The largest factor determined on your FICO credit scores are your basic payment history. The number of unpaid bills you have, any bills sent to collection, bankruptcies etc... The more recent the problem, the lower your credit scores.

• Outstanding Debt (30%). Are your cards maxed out? High balances or more precisely, balances that are close to your credit limit can negatively effect your credit scores. Keep your balances below 30%.

• Length of your credit history (15%). How long have your accounts been open? The longer, the better.

• Recent inquiries (10%). Every time you apply for credit of any kind, you create an inquiry on your credit report. Lots of Inquiries negatively effect your credit scores.

• Types of credit in use (10%). Current loans from finance companies. How many and how much.

What is a Good Credit Score?

Your credit report scores will range between 300 and 870. The higher the better. As your credit scores increase, your credit risk decreases. In answer to the question, What is a Good Credit Score, exact numbers differ by lending institution but the average high approval score is 680 or above. Often times your credit scores are taken from all three credit reporting companies and the middle score or average score is used.

Depending on the lending institution, your credit scores can cost you. Some lenders will charge a higher interest rate if your credit scores are below 600.

When you apply for credit your score does not come directly from FICO. Instead each bureau has its own version of the rating system with its own name.

Equifax is called Beacon
Trans Union is Empirica
Experian is Experian/Fair Issac

Credit scores of 680 or above can save you money, especially for home loans. If you are considering a significant loan you will want to be sure to check your credit reports first. If negative items appear on your report you have two choices. Live with it for 7 to 10 years or dispute these items.

Credit Score Overview

This is a brief guide to help you determine your credit score based on your credit history

Excellent (Credit score higher than 680) - if you have had
• No 30 day late mortgage payments in last 2 years
• No 30 day late payments on credit cards/consumer debt in last 1 year
• No charge offs, judgments or repossessions in past 2 years
• No bankruptcies, foreclosures in past 4 years

Good (Credit score between 650 and 679) - if you have had
• No 30 day late mortgage payments in last 1 year
• Less than three 30 day late payments on consumer debt in last 1 year
• No charge offs, judgments or repossessions in past 1 year
• No bankruptcies, foreclosures in past 4 years

Fair (Credit score between 620 and 659) - if you have had
• Less than one 30 day late mortgage payments in last 1 year
• Less than three 30 day late payments on consumer debt in last 1 year
• Less than one charge offs, judgments or repossessions in past 1 year
• No bankruptcies, foreclosures in past 3 years

Poor (Credit score less than 620) - if you have had
• More than one 30 day late mortgage payments within past 1 year
• More than three 30 day late payments on consumer debt in last 1 year
• Numerous charge offs, judgments or repossessions in past 1 year
• Bankruptcies, foreclosures within past 2 years