What is a good credit score?
One of the most important aspects of personal finance is one’s credit score. As great as it would be to be able to buy anything you needed in cash, that is simply not an option for the average person. The availability you have to credit and the rate at what you get credit at all depends on what your credit score is.
A credit score can be anywhere between 300-850 points, but it is very rare for a credit score to be under 500 points. The average credit score is a hair under 700 points, if your credit score is 700 or higher, you are in pretty good shape. You should be able to have access to several lines of credit even in a down economy.
If you already have a credit score above 700, congratulations!, you still need to be intent on raising your score however. Raising your credit score a mere twenty points, which is very easy to do, can lower your monthly house payment by 40 dollars a month and your car payment by 20 dollars a month. That is virtually free money.
It is important to remember that credit scores are taken from three different bureau’s so your score could vary depending on what bureau your creditor is getting its information from.
Since the financial crisis of 2008/2009, credit has been in short supply. Banks are weary to lend money which makes having a great credit score even more important. In times as rough as we are in currently, you might as well subtract 50 points from your score, this is how creditors see your score in a recession.
The bigger the loan you are looking for, the better credit you need to have for the most part. A bank risks much more giving out 200,000 dollars for a 30 year mortgage than it does giving out 20,000 dollars for a 5 year car loan. It also takes much more time for the bank to recoup its investment the bigger the loan is. If you are looking at getting a mortgage within the next couple of years it is of utmost importance that you get your credit score in order.
The difference between having a decent credit score, 670, and a good credit score, 740 is small numerically but huge financially. Your credit score can make or break your finances so make sure you keep that in mind!