What is considered a Good Credit Score?

A credit score ranges from a low amount of 300 to a maximum of 850. Many people have heard of this scale and know their current scores, but have no idea what is considered a good credit score. A decent one varies from 650 to about 750 but these are just numbers. It is important to know what is considered when calculating your score so you can reverse or repair the issues weighing your credit down.

Top 5 Areas Considered for Calculation

1.     Payment Patterns – Accounting for approximately 35% of your overall score, your payment patterns in terms of timeliness are weighed heavily. If you have one too many late bills paid, your score will definitely be low. 

2.     Level of Debts – If the level of your debt is within close proximity of your credit limit then you will likely have a low score. This factor accounts for about 30% of the whole.

3.     Length of History – A longer history of revolving credit will improve your chances of obtaining a high score. This area counts for 15% of your score and shows that you have experience with meeting your financial responsibilities.  

4.     Inquiries – This refers to how many attempts you have made to apply for credit. Inquiries to numerous companies will indicate that you are in dire need of credit. Although it only contributes roughly 10% of your score, too many applications for credit reflect poorly on your report.

5.     Types of Credit – It is recommended to have various types of credit on your history. This area accounts for 10% of your score and shows that you have prior experience to manage different types of credit. 

Companies that Will Consider Credit Scores

• Insurance Companies – A majority of insurance companies will run routine credit checks before finalizing your premium. If you have extremely low credit or none at all, you will likely need a deposit or cosigner before being approved. 
• Landlords – If you are looking to move to a new residence, the landlord of the property will likely run your credit to see if you have a history of late or non-payment.
• Employers – In certain industries, employers will check the credit score of all job applicants before hiring. This is to ensure that there will be minimal risk for employee theft or other conflict of interest.
• Service Providers – Providers like cell phone companies typically check your credit score before allowing you to open an account. Even though you are the paying customer, a negative credit score may keep you from having your own account.

Why a Credit Score is So Important

In a unpredictable and unstable economy, it is crucial to have good credit because it can come in handy if you ever need a loan. A common misconception is that bad credit will only affect approval for loans. But other priorities like renting, applying for a job, and opening an account with many service providers will prove to be a challenge all because of poor credit.

Article Written By: Diana Lee (dWriter729) 

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