These days, you can’t turn on the television or radio without hearing something about credit scores. Are your credit scores good enough? How high do your scores need to be? What exactly are credit scores, anyway? These are all valid questions. Fortunately, these questions and more have easy answers.
A credit score is your perceived level of risk to lenders, and consequently, your borrowing power. A higher score generally indicates that you appear safer to lenders and therefore will have a greater ability to borrow.
There is no fixed cut off for how high your credit score should be. The higher it is, the better your lending power, and the worse it is, the more you will struggle. A credit score in the 600s should enable you to get a loan with reasonable terms. However, you should always be trying to improve your score.
There are many steps you can take to improve your credit score. The first step is to find out what your credit score is. You obviously can’t improve your situation until you know where you stand. Once you’ve gotten your score and seen your report, you are better equipped to improve your score. You can do this by making sure you are making regular payments on all your credit cards and loans, preferably more than the minimum. You can take steps to make sure your credit limits exceed the amount you’ve borrowed. The bigger this gap is the better off you are. You also can adjust your budget so that you won’t need to borrow any additional money until some of your debt is paid down. These are all great solutions that take some work, but can pay big dividends with your credit score.