What’s a good credit score and what are its components?
Whenever you apply for a loan, the lenders/creditors check your score in order to assess your creditworthiness. It helps them to assess the risk associated with offering you the loan you’ve applied for. They want to verify whether or not you’ll be able to pay back the loan on time. So, before applying for a loan, you should at first know whats a good credit score so that you can check whether or not you’ve that score. If required, you can increase your score before applying for a loan.
Credit score – What it means
Credit score is a 3-digit number that usually ranges in between 300-850. The higher your score, the better your chance for getting a loan with suitable terms and conditions. If you have a good score, the lender may charge a low interest rate for offering you the loan.
Components of a credit score
FICO (Fair Isaac Corporation) score is the most widely used scoring models that the credit bureaus use to calculate your score. The formula that FICO uses is top secret; however, the company provides an overview of what it considers in order to calculate credit scores. There are usually 5 components of a credit score that are given below.
- How much you owe to your creditors and your ability pay back loans
- Your payment history that determines your ability to repay loans on time
- The length of your credit history that is based on your oldest credit account
- New credit accounts that you have established
- Types of credit accounts you have
What’s a good credit score
Are you wondering about whats a good credit score? If yes, then you should know that a credit score of 650 may be considered as a good one today but it may not be so good next year. Post-recession, the FICO score above 700 is considered to be a good credit score. If your score is 700 or more, then you can get suitable terms and conditions on your loans. However, you may qualify for an FHA mortgage loan if your score is 620.
So, it may be said that the required score depends on what type of loan you’re taking out. Lenders may not require you to have an excellent score when you’re taking out a new credit card but a score of 700 may help you to get a suitable interest rate when you’re taking out a conventional mortgage loan.
It is advisable that you check your credit reports and scores from at least 3 bureaus namely, Experian, TransUnion and Equifax. This is because not all creditors/lenders report and check scores from each of the 3 bureaus. So, you should check your 3 credit scores to make sure that you’ve the required score to take out a loan with suitable terms and conditions.
Related Resources:
Financial credit – The site is all About Financial Credit,Financial Credit Union, Schools Financial Credit Union,Family Financial Credit Union,Financial Credit Network,Financial Credit Report,FM Financial Credit Union.
Improve Credit Rating – Welcome to the home of all the credit rating information you’ll ever need! If you’re looking for ways to increase credit score or simply need more information about it, you’ve come to the right place!
Credit Score Range – Guiding You To Find Out What Your Credit Score Range And How To Increase It With an Expert Opinion.