What is a good credit score?
A credit score represents an individual’s capability in paying his or her debt.
This is vital information used by lenders, banks, and credit card companies in the U.S. to check a consumer’s eligibility for credit.
It all boils down to determining what is a good credit score and other factors that help a consumer secure or fail in getting a loan approved. A good credit score will most likely help a consumer in accessing better deals when securing a loan.
A credit score ranges from 300 to 850. Generally, a person’s credit score is described as bad or excellent, depending on where their scores fall.
Lenders may have a different definition of what is a good credit score.
Lending companies may approve a borrower under the fair credit category. Others may only allow individuals with a credit score of 750+ to secure a loan. Some might approve those under the fair credit and the good credit categories but with a lower interest rate for those with a good credit score.
A good credit score entitles a consumer access to more credit products, at a lower rate.
In comparison, those with scores lower than 500 may still be able to secure a loan or get a credit card, but at a higher interest, with a deposit, and other specific conditions.
A credit score determines two things when securing a housing loan. A minimum credit score is needed to qualify for a mortgage. A person’s credit score is also used to determine whether a consumer is qualified for the lowest interest rates in securing a housing loan.
For a conventional mortgage, a FICO score of at least 620 is required.
FHA loans require a lower score of 500 to 580. However, it will require a certain percentage of the total amount of the property – 10% for a credit score of 500 and 3.5% for a credit score of 580. Currently, most banks in the United States approve conventional mortgages and FHA loans for borrowers with a credit score of 620 and above.
Credit card issuers do not reveal their standards on application approvals.
A credit score of at least 720 guarantees the best interest rates, 0% balance transfer cards and travel reward credits.
It can even secure a consumer a business credit card. Some credit card companies need a good, if not excellent credit score which is around 660 to 719.
There are no standards set and credit score requirements for securing a car loan. It varies from one lender to another.
A good credit score standing of 720 allows access to the lowest rates available.
An excellent score of 760 gives access to the lowest interest on a mortgage.
Meanwhile, subprime car loans are available for those with a credit score in the 500 to 600 range.
Federally-guaranteed school loans do not need an individual to have a credit score.
But, private student loans include a person’s credit score in their requirements. There is no definition of what is a good credit score when it comes to private school loans.
Lending companies check these three factors in reviewing student loans:
Do you wonder how credit scores are computed? Darbe Nokes shares additional insight in this video:
Again, lenders have different standards in determining what a good credit score is.
Specific scores also do not guarantee access to the lowest interest or to a guaranteed approval.
In general, knowing what your credit score helps you determine which offers you can apply for. Knowing your credit score helps you determine areas in your finances that can be improved. Credit repair can improve your credit score to help you qualify for a loan you plan to apply for in the future.
Still confused with what a good credit score is? We will answer your thoughts on our comment section.
Interested in getting back to school through a student loan? You might want to read this article on How Student Loans Affect Your Credit to guide yourselves accordingly.
Photo Credit: CafeCredit
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