What Is A Good Credit Score?

You are constantly hearing about how important a good credit score is but do you really know what is a good credit score? Credit scores are used in determining whether or not you are a bad risk or good risk when it comes to obtaining a loan.

Credit scores are also known as FICO scores. A California based company named Fair Isaac Corp developed the structure of the FICO scores. The credit score is basically a number based on how well you pay your bills and if you are creditworthy.

The FICO scores can range anywhere from 300 to 900. The national average is 645. The higher the score the more creditworthy you are and the more willing financial institutions will be to lend you money. The number for your FICO score is derived from the information found on your credit report. There is a special formula used to calculate your score.

Today, it is important to maintain a good credit score if you want any chance of being eligible for loans and good rates. If your score is low then you are considered a high risk and lending institutions may refuse to lend you money. You also run the risk of having higher interest rates on your loans.

The best way to obtain a good credit score is to pay any bills and other debts in a timely manner and avoid having late payments or defaulting on any payments. Another thing to be cautious of is asking for to much credit in a particular amount of time. Creditors frown on multiple inquires performed over a short amount of time. If you do have issues with your credit, there are places that can assist you with getting your credit back on track and helping to improve your creditworthiness.

How is a credit score affected you may wonder. The scores are determined based on the type of accounts you have had such as revolving or installment. The amount of credit you have requested in a period of time is also a consideration. Most importantly is the amount of debt and if you have any delinquent payments. All these things play a key role in determining your FICO score.

Different lenders are going to judge different areas of your credit report. The FICO score is going to determine whether there needs to be a full investigation into your credit report or whether you can bypass what is known as underwriting. Typically as a rule of thumb, lenders are going to do some minor investigating of your credit report if your FICO score is below 660. If your score falls below 600, you will more than likely have to undergo a thorough investigation of your credit by going through underwriting.

Credit scores are important and understanding what is a good credit score is even more important. Your credit score is going to determine whether you are creditworthy and worth taking a risk on. If you do have credit problems there are solutions out there to help improve your credit scores. It is important to try and keep a high credit score in order to obtain loans and receive the best rates possible.