A good credit score range is 690 to 719. An excellent credit score range is 720 to 850. A credit score is a number assigned to an individual based on your credit report that represents your credit worthiness.
A Credit report has detailed information such as the name of the creditor, date, length of time that credit was established, payment history such as timely or missed payments.
This information is maintained in a record at one of the three main credit bureaus, Transunion, Equifax or Experian.
Companies will use your credit score to determine if they will extend you a loan or line of credit for a purchase such as a home, car or to start a business. Your credit score will determine the interest rate and terms in which the loan must be repaid to the lender.
Credit scores range from 300 to 850 points and are based on your payment history, utilization ratio, length of time that you held the loan and the type of loan.
Generally a 700 score is considered good credit and a score of 800 is considered excellent credit.
Factors That Affect Your Credit Score
Late Payments
Late payments will lower your credit score fast. Payment in full is best. If you are short on cash, pay at least the minimum payment on or before the due date.
Credit Utilization
Credit utilization is the portion of your credit line that is currently being utilized. If your credit cards are maxed out or over the limit, this can significantly lower your credit score. Pay off balances in full each month. If you are unable to pay off your balance in full, lower your credit card balance below 30% for good credit and 10% for excellent credit.
If you have not paid off the balance in full, do not close the account. This can significantly drop your credit score. Once the card in paid in full, then close the account.Below is an example of credit utilization:
- Credit line: $1,000, balance $100 (10% utilization)
- Credit line: $1,000, balance $300 (30% utilization)
- Credit line: $1,000, balance $500 (50% utilization)
Keep credit utilization below 30% for best results.
How Frequent Do You Apply for Credit Cards
The frequency in which you apply for credit cards can have an impact to your credit. If you applied for multiple credit cards during a short period of time, your credit score can go down temporarily.
Wait at least six months before applying for another card.
Types of Credit
The type of credit you use can affect your credit score, such as, installment loans, retail store accounts, mortgages or car loans.
Making payments on time and the length of your credit history can improve your score, track your progress with an app like Credit Karma. Keep your credit card balances low or paid in full each month, your credit score will be positively affected.