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    What Is Considered A Good Credit Score?

    If you're seeking a loan, job, or even a new home, approval is often dependent on your credit score.  Every company that lends to consumers ultimately makes its decision after reviewing a borrower’s score because it helps them determine the creditworthiness of the applicant. 

    Accordingly, a common question that arises among borrowers is what is a good credit score number? Although it may seem complicated, the credit scoring system and how borrowers can build credit is actually fairly straightforward. Read on to learn what qualifies as a good score.

    What Is Considered A Good FICO Score And How Is It Calculated?

    There are two common types of consumer credit scores, and the most well-known version is the FICO score. The FICO credit rating scale scores borrowers from 300 to 850. 

    The higher the score credit, the better your likelihood of approval for credit, tenancy, and certain jobs. For example, if you're someone with a score above 670, this is generally considered a “good” score. To have the best chances of loan approval, you should try and maintain a score above 700. 

    FICO Credit Score

    300-579Very Poor
    740-799Very Good

    What Is Considered A Good VantageScore And How Is It Calculated?

    VantageScore is similar to a FICO score and was introduced by the leading credit bureaus Experian, TransUnion, and Equifax.  The credit rating scale follows a similar 300-850 range and a score between 661-780 is considered “good” for borrowers. The VantageScore scale for borrowers is as follows:

    VantageScore Credit ScoreRating
    300-499Very Poor

    Why a Good Credit Score Is So Important

    Whenever you apply for credit cards, loans, mortgages, other types of financing, jobs, and even renting a house or apartment, creditworthiness is one of the first ways your ability to pay is judged. A credit score enables a lender to predict the likelihood of loan repayment before deciding on the terms and conditions such as the loan APR which is the annual interest rate.

    Your scores play a crucial role towards accessing the best rates and terms available. If you’re someone who has a good score, there is a high chance of you being able to borrow a higher amount, renting a better house, or purchasing your dream car. However, if your score is near the lower end of the scale, you might end up with a pool of offers with less attractive terms and conditions.

     What Data Affects Your Credit Score?

    Numerous factors impact your credit score. These factors vary on the type of scale you are using to determine your score.

    The most common factors used to calculate credit scores includes:

    • History of payments made including late payments and missed payments
    • How much of total available credit is utilized
    • The number of credit accounts along with their age and type
    • The total credit balance outstanding which is owed
    • Bankruptcy records and other public records which could impact scores
    • The history of hard credit inquiries

    The factors ranked by importance that impact a FICO score include the following:

    • Highest Impact: A borrower’s repayment history
    • High Impact: Credit utilization, age of outstanding credit accounts, types of credit
    • Medium Impact: Total debt balance outstanding
    • Lower Impact: Total credit available, credit inquiries, and recent repayment behavior

    By comparison, the factors that affect VantageScore include:

    • Highest Impact: History of payments including on-time, late, and missed payments
    • High Impact: Credit utilization, age of outstanding credit accounts, types of credit
    • Medium Impact: Total debt balance outstanding
    • Lower Impact: Total credit available, credit inquiries, and recent repayment behavior

    In addition to the factors that influence credit scores, there are some misconceptions about the factors that do not affect your score:

    • Personal demographic data like age, race, religion, and marital status
    • Job data like salary, title, company, employment history
    • Soft credit inquiries

    The Steps You Can Take To Raise Your Credit Score

    Credit scores are dynamic and regularly updated based on your borrowing behavior. If you have a lower score, here are some tactics that can help raise your score over time:

    • Reduce total credit utilization to below 30%
    • Regularly pay installments on-time, every time
    • Use a secured credit card and repay the outstanding balance on-time, every month
    • Review your credit report to spot any errors that might raise your score
    • Check out a credit repair service
    • Consider applying for credit builder loans

    What Is The Minimum Credit Score You Need For Credit Approval?

    Having a minimum score to secure a loan is a myth. However, your scores are a critical factor for lenders when determining the amounts and terms that you are qualified to receive.

    Having a higher score increases your chances of accessing better terms. If your score is low, there is a higher chance of getting denied or receiving worse terms like small loan amounts or higher interest rates.

    How Do You Apply For Loans If You Don’t Have A Credit Score?

    Having no credit history or no score is possible, and usually happens because your credit history is insufficient to assign a score. If this is the case, the following details ways to increase your score:

    • For credit applicants who are under 21, have a co-signer act as a guarantor
    • Apply for a secured credit card that requires an initial deposit to open
    • Request a limited credit account from your bank to start raising your score and practicing good financial behavior

    Quick Facts About Credit Scores

    • Your Credit Reports Versus Your Credit History: Credit reports have no record of your credit score. Your score is calculated each time it is requested and is not stored in your credit history. However, your credit history has a direct impact on your scores, and a poor history can lower your score.
    • Opening Joint Credit Accounts: These types of accounts are designed to help less creditworthy borrowers access loans and other credit products by bringing in another party to “guarantee” repayment. The co-signer or guarantor who opens the joint account is equally responsible for repaying any debt if you miss repayments. Positive repayment behavior can benefit all the joint account parties and improve everyone’s scores but scores can also drop for all parties when payments are late or missed.
    • The Impact of Marriage: When you get married, your score will not be merged with your spouse’s credit score. Each spouse maintains a separate history and score.
    • Evaluating Your Own Credit Score: Whenever you request a copy of your credit report or check your own score, this activity will not hurt your score. This is considered a soft credit inquiry and helps you identify areas where you can work to improve your score over time.