What is a Good Credit Score?

Understand this vital number and how it impacts your life

What is a good credit score…...To often people do not know this answer and it plays a vital part in their life.  A good credit score can ultimately save you a lot of money and who doesn’t like that!

How to improve a bad or no credit score

Payment history - accounts for 35% of credit score

Paying your bills on time is huge when trying to improve a bad credit score and/or trying to establish a good credit score. Always pay your bills on time.  Get out of that minimum payment mentality.  If you do that you will end up paying hundreds if not thousands more over the long run.

Amount owed - account for 30% of credit score

Want to try to keep your amount owed on your credit card below 20% of your available credit. Your credit line is your monthly line of credit it will start out small at like $500 or $1000 dollars when you get your first card. Mine started at $500 when I applied for my Discover card. So 20% or less of $1000 is $200 per month is the number you would want to stay below. Over time they will ask if you want to increase your limit and/or you can ask to have it increased as well. They will normally grant you your request as long as you have a good history of making your payments on time. Just because you increase your limit doesn’t mean you start spending more. Remember to keep strive to use less than 20%.

Length of credit history - account for 15% of credit score

The longer your established credit is the better off your score will be. Even if you don’t plan on using the card it is good to establish some type of credit history.

New credit - account for 10% of credit score

Anytime you open up a new line of credit. For example, whether that is buying a home, a car, or opening up a new credit card at first it will bring down your credit score; but soon after if you have showed that you are paying on time it will ultimately improve your credit score. Don’t apply for new credit just for the heck of it though. Do your research when it comes to applying for new credit and ask yourself if you truly need it.

Types of credit used -  account for 10% of credit score

The different types of credit that you have open will impact your credit as well. Whether is a house, car, student loans etc.

Where to get your credit score checked

You can get your credit score checked once a year from the following three credit bureaus. It is better to space these out throughout the year instead of getting them all checked at the same time. The credit bureaus are Experian, TransUnion, and Equifax. You can go to www.annualcreditreport.com. Review 1 report every 4 months (rather than piling on 3 at one time). Consider creditkarma.com (provides the TransUnion and Equifax scores) and credit.com (provides Experian score) to track all 3 scores. These sites are FREE. Just ignore the advertising.You don’t want to “hard pull” of checking your credit score more than once a year because getting it pulled too many times will hurt your credit. Doing a “soft pull” like going to the website above will not hurt your credit score. A hard pull would be seeing what interests rate they would give you when buying a home, a car, starting a business, etc. Do you research and know for sure before having those companies pull your credit score. That is why every time you open up a new line of credit it will bring down your credit score at first.

Credit Do’s

  • Do pay your bills on time
  • Do keep records of all debts
  • Do monitor your credit and dispute errors immediately by going to websites above
  • Do ask creditors to increase your limits
  • Do be careful when closing old accounts.  Sometimes it is ok but others it is NOT ok.

Credit Don'ts

  • Don’t cosign for someone 
  • Don’t Hide from creditors.  Eventually they will find you and that running interest tab has been going the whole time.
  • Don’t Pay someone to “fix” your credit history or consolidate your debt
  • Don’t open up new credit for the heck of it. You must have a good reason.
  • Don’t open one just to buy more stuff
  • Could be ok to open one if you're buying an appreciating asset. Ex: a business, a home, etc.  NOT a car.

What is a Good Credit Score

Achieving a good credit score will save you thousands when applying for a mortgage loan by getting the lowest possible interest rate that you can.  It can help you qualify for 0% APR for a car.  Some employers will want to look at your credit score,  so it can help your ability to get employed.  Insurance companies will want to know as well and any other credit offers that you come across.  

By simply following these steps you will know what is a good credit score and how to achieve it easily.  The goal is to get to 760 so you get the best rate possible.