February 9, 2009
To be good at anything you need to be better than average. This seems to be the rule. So what is the average credit score? Most sites I found stated around 680.
The real truth is this is just a general rating. The person who really determines if you have a good credit score will be the lender. Keep in mind, that each lender has their own guidelines they follow. So if you have a credit score of 700, lender A will give you a nice interest rate, but lender B might not give as attractive of a rate. It truly is in the eye of the lender.
Another consideration is the credit crisis the country seems to currently be in. This has made it increasingly hard to get credit. Furthermore, creditors have start to reconsider their lending guidelines making a higher score needed to get a loan.
The rule you should follow is the higher the better. Any credit score at or above 700 is a good credit score. You are better than average and should not have a hard time getting approved for a loan.
How to get a good credit score
To start on a path to a good credit score, you need to know several things.
First, how is a credit score calculated. It is a complex formula that takes several factors into account that are found on your credit report. Here is the list along with their weight:
- Payment History 35%
- How Much You Owe 30%
- Your Credit History 15%
- Applications for Credit 10%
- Your Credit Mix 10%
The next part is to get a copy of all your credit reports and credit score. You want to either get a 3 in 1 credit report with a credit score or check out MyFICO to get your Fico Scores/Reports. You want all three because there are things that could be on one report but not another. Also, you want your credit score to see where you are starting and to set a goal for yourself. This is a must if you want to get a good credit score. These are not free but they are worth it considering how much money you could save by you having a good credit score.
Now that you have you credit reports, the next step is to review your credit reports and check for any mistakes. You need to dispute credit report errors. Around 70% of credit reports have errors on them and your credit reports more than likely have some. This could be one the easiest and most forgotten about ways to improve your credit score.
Next is to use what you learned about what goes into your credit score to push your score higher. One the biggest is to just pay your bills on time. This has the largest effect on your score and late payments will only drag you down. Other things like: paying down your debt, don’t apply for new credit on a regular basis, and use many different types of credit will also lead you in the right direct.
The truth is you should be trying to get not only a good credit score but an excellent one. These are scores above 750 and really have huge benefits through out your life. Check out how to get a excellent credit score.