When it comes to credit scores, it can sometimes be hard to know what is good. Credit score information can be confusing, and there isn’t necessarily a hard number that tells you what is bad and what is good. Credit score ratings are more about a range of scores that put a potential borrower in a certain category. There are a lot of questions about what makes a good credit score rating. Here are the answers.
There’s no one score that means you have good credit. Lenders look at the range a score falls in, knowing what percentage of borrowers in each range default, or fail to pay. Those with scores in the 740 and above range tend to show the smallest percentage of default, while those in the below 600 group usually show the most default. Lenders aren’t looking for a particular number so much as making a calculation based on what your number represents.
Lending policy will vary from lender to lender. What you can assume is that the higher your score, the more likely you are to get a loan and the better chance you have of getting a competitive interest rate. While other factors may play a part, those with credit scores of 740 and above will usually get the loan they want at the best rates. Those with scores in the high 600s and low 700s will still usually have no difficulty getting a loan, and will enjoy decent rates as well. Those in the low 600s may struggle to get the loan they want and pay higher premiums for borrowing. While those in the 500s and below will struggle a great deal to get approved and if they do will pay high interest rates.
Lenders are not making a judgment about you personally based on your credit score. They are simply doing a mathematical calculation that makes it statistically likely that they will make money. What they are doing is setting interest rates for each group at such a level that the percentage that actually pays their bills covers the percentage that doesn’t. That isn’t really fair, but that’s how it works. You may have no intention of defaulting, but if you are in a high risk group, you have to pay for those who will. If you can get out of that high risk group, you’re no longer responsible for those risky borrowers, and you can enjoy much better interest rates.
Find out your credit score today by at CreditScore.com. You’ll get your credit report and scores for all three credit reporting bureaus, so you can see if your score is good enough to get the loan you want, and if it is not, you can try to make it better.