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What is considered a good credit score?

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asked Jul 29, 2015 in Finance by AndreaM (20,510 points)
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One's credit rating can often fluctuate depending on financial decisions made during the year [1]. It is pertinent to pay off your debts as soon as possible to maintain a high credit score. This can assist with obtaining loans down the road. Yet, a lot of people don't realize what a 'good' credit score is.

So, what is a good credit score?

A good credit score can be deemed as anything above 600. However, a great score is anything above 661. Those with a flawless score will have a perfect 850 [2]

References

1. http://www.investopedia.com/terms/c/credit_score.asp
2. http://www.credit.com/credit-scores/what-is-a-good-credit-score/
answered Jul 29, 2015 by kingusama92 (23,380 points)
selected Aug 5, 2015 by AndreaM
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According to Bankrate, a credit score above 740 is considered a good score. This is considerably higher than what was considered a good score in the past since lending requirements have gotten far more stringent. [1]

 

Most of the best interest rates go to borrowers who have scores over 740. As soon as scores fall below this level, additional fees start getting added on. For instance, Fannie Mae and Freddie Mac both charge extra fees for borrowers whose credit scores fall in the 720-739 range. This used to be considered an excellent score, which shows just how much lending standards have changed.

 

However, even if your credit score is not that high, you generally still can qualify for home loans or car loans. For instance, you can qualify for an FHA loan even if your FICO score is below 580 as long as you are willing to put 10% down on the home and you meet all of the other borrowing requirements. [2]

 

Unfortunately, the lower your score is, the higher interest rate you will have to pay on any loans that you take out. Also, you may be charged additional fees, making it more difficult to afford a home, a car or other large-ticket items that you need. 

 

Not only that, but a low credit score can negatively impact your life in a lot of other ways, too. For instance, it can make it harder to get a job since many employers use credit scores when evaluating candidates. It can also increase the amount of money you have to pay for car insurance since insurers consider drivers with low credit scores to be higher risk than those with high credit scores.

 

The best way to combat these problems is to raise your score as much as possible before you apply for a loan. This video takes a look at some of the steps that you can take to improve your credit:

 

 

References:

 

1. http://www.bankrate.com/finance/real-estate/good-credit-score-not-good-enough-anymore-1.aspx
2. http://www.fha.com/fha_credit_requirements

answered Sep 12, 2015 by blueskies (57,070 points)

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