A good credit score is what each of us aspires to. After all, a credit score is one of the important determining factors when it comes to borrowing money - and getting a low rate when you do.
But trying to pin down a specific number that means your credit score is "good" can be tricky. When it comes to figuring out what makes a good credit score, there are a few different schools of thought.
Most credit scores - including the FICO score and the latest version of the VantageScore - operate within the range of 301 to 850. Within that range, there are different categories, from bad to excellent.
But even these aren't set in stone. That's because lenders all have their own definitions of what is a good credit score. One lender that is looking to approve more borrowers might approve applicants with credit scores of 680 or higher. Another might be more selective and only approve those with scores of 750 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate!
Don't assume your score is good (or isn't) just because you have always paid your bills on time (or haven't.) The only way to know whether you have a good credit score is to check. You can get your credit score free once a month using Credit.com's Credit Report Card. This is a truly free credit score - no payment information is requested. In addition to the number, you'll see a breakdown of the factors that affect your score and get recommendations for making your credit as strong as possible.
Credit scores are computed based on mathematical models that interpret and analyze information in your credit reports. Credit scores compare factors like payment history, debt levels and the age of credit accounts to figure out what consumers who pay their bills on time have in common. The goal is to predict now new and existing customers will handle credit.
Ultimately, then a credit score summarizes the information in your credit report, which makes it easier and faster for a lender to process a loan application and make a determination as to how likely you are to pay back the loan in question.
A good credit score will help you borrow money for a car or home, or open a credit card with a comparatively lower interest rate. That means you will pay less over time for the money. Get your free credit score and Credit Report Card now.
Consider this: if you're buying a $300,000 house with a 30 year fixed mortgage, and you have bad credit, then you could end up paying more than $90,000 more for that house over the life of the loan than if you had good credit.
So, in the end, it really pays to have good credit.