What is a good credit score and why should you care? If you have ever asked these questions, you are not alone. This article explains what a good score is, why it is important to have one, and what you can do if yours is less than perfect.
Many of our clients have a similar story—they were in the process of making a major purchase, such as a car or even a home, when their lender offered them a loan with a high interest rate, or worse, denied their request for a loan. What happened? Why did the lender not offer them the same interest rate as others? Why were they denied?
In cases like these, we often trace the reason for the high interest rate or loan denial to problems with the client’s credit score. If you are dealing with problems such as these or want to avoid them, here are three critical facts that you should know.
What Is a Good Credit Score?
In general, credit scores range from 300 to 850 and are calculated using information from a person’s credit report. While the three major reporting agencies—Equifax, Experian, and TransUnion—use some different criteria to issue scores to consumers, a good credit score usually falls near 700. To break it down further, let’s look at what each agency considers a good credit score.
What is a good credit score? Equifax labels a score as “good” if it falls between 660-724. For Experian, a good credit score lies somewhere in the 670-739 range. TransUnion has the lowest good score range at 650-699. As you can see, the answer to this question depends on which agency is issuing the score.
It is also possible to have a “very good” or even “excellent” credit score, but for most consumers, maintaining a score in the “good” range is usually adequate for their needs.
Why Is It Important to Have a Good Credit Score?
Having a good score comes with certain advantages. Lenders use credit scores to determine how much of a risk you are when deciding whether to offer you a loan. A good score allows you to take out loans with reasonable interest rates and affects the terms for many different types of loans and financing, including:
- Mortgages
- Car loans and leases
- Credit cards
Your score can also affect your insurance rates and, if your score is low, it can even bar you from certain types of employment.
Is It Possible to Improve a Bad Score?
Fortunately, if your credit is less than perfect, you can take steps to improve it, which will allow you to seek better opportunities. Are you interested in improving your credit score? Talk to the experts at U.S. Credit Defense today to learn how we can help you achieve your financial goals.