Archive for the ‘creditworthiness’ Category

What is a good credit score?

Saturday, July 19th, 2008

You paid for your credit report on-line with your credit scores. You print it out, and the question is now what? Do you even know how to read or decipher what is on there? You might be asking yourself what is a good credit score, and do you have good enough credit to get the best terms and rates on any loan.

Every lender has its own criteria for lending someone money. Every insurance company, employer, credit card companies, and bank sets its own credit report and credit score standard. So what is a considered a good credit score by most standards.

Fair Isaac’s credit score model is like a standard amongst other credit score models. What does this mean? This means that there are other credit score models used to determine your risk, but most of them designed there credit scoring model after the FICO score model. FICO scores range between 300 (very bad) to 850 (very good).

About three years ago all the credit bureaus got together and came up with a credit scoring model called “Vantage Score.” These credit scores range between 501 to 990. But when it comes to credit scores the most widely used is the FICO score model.

As you can see there is a wide range of credit scores. You might be asking yourself what is considered good still. Well a good rule of thumb is to have at least a 680 credit score. There are 3 credit bureaus and each report there own credit score. Equifax, TransUnion and Experian are the three bureaus. Lets assume your Equifax credit score is 720, Experian is 660 and TransUnion is 680, your middle credit score is what most banks use. So you credit score used is 680. Usually with this type of credit score you can get approved for just about any loan. That does not mean you will get the best rates and terms though. If you are looking to get the best rate and terms you will need at least a 720 plus middle FICO score.

All loans are based on risk, and the credit scoring process is a mathematical solution to determine whether you will pay back the creditor or not. The lower your middle credit score the higher risk you are to all creditors concerned.

Remember some creditors have there own internal credit scoring process. So your credit score will not be the same with everyone. My advice would be to always pay your bills on time and keep your debt low. These are the two biggest factors in the credit scoring process.
