What A Good Credit Score Is And How You Can Get One

Written by mrcredit101
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Good credit is not born; it's made. When you have a good credit score you get access to better money borrowing options such as lower interest rates, longer repayment terms, and unsolicited card or loan offers. So what is a good credit score, then? To better understand the concept let's take a look at the principles of credit first.

Credit means having access to other people's money. When you have a credit card and purchase items with your card, you are in effect using the credit card company's money to buy. By using your card you are incurring a debt to the company. When your statement comes in, that's the time you return the money you borrowed. If you choose to pay the minimum amount due, you are asked to pay an interest for the rest of the money you borrowed but didn't pay yet.

The credit score is a grade that credit bureaus assign to you based on your credit report. Your credit report is a compilation of your credit information from all the companies you've had financial transactions with. It is computed by averaging all your credit information – how much money you've borrowed, how prompt you were in paying them off, how much of the money available to you was used, and how many debts you have. The better you are as a debtor, the higher your credit score will be. So what's a good credit score – it's the score that you get when you show that you are a trustworthy and diligent debt client.

Credit agencies look at specific information in your credit report to compute your credit score. Your payment history is the most important factor, accounting for 35% of your credit score. Next comes how much money you owe, which is 30%, then the length of your credit history, which accounts for 15%. Last are your applications for new credit and the types of credit you use, which account for 10% of your credit score.

When you borrow money or apply for a credit account, lenders will look at your credit report and score to decide whether they'll grant your application and what terms they'll give you.

The FICO score, which ranges from 300 to 850, is the score used by most lenders. The ideal credit score is 700 and above. Lower than that means you'll have less options when you borrow money because lenders will not give you the best rates; they'll reserve that for those with a good credit score.

How do you achieve a good credit score? The key to getting what is considered a good credit score is paying all your bills on time, avoiding using too much of your credit limit, and making sure all the information in your credit report is accurate and updated. It's basically being frugal with your money and where necessary, making lifestyle changes in order to save.

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