What is a Good Credit Score Nowadays Anyway?
It can be confusing trying to find the best credit deals available and while you know you need good credit to get them, exactly what is a good credit score? The highest number on the scale is an 850, but you don’t have to have perfect credit to get a good deal.
So what is a good credit score then?
If you have a credit score of 770 or above, you are considered the cream of the crop as far as credit worthiness is concerned. Many people suffer from credit scores that are lower than a 770, but those who have upwards of the high 700s don’t need to concern themselves with raising their rates even higher. When Sallie Mae or Freddie Mac, Capital One or one of many banks or brokerage companies see that you have a 770, they don’t really care how much higher your credit score is. As long as it is above that mark, then you can count on interest rates hovering near 0% on credit cards, and interest rates close to 4.5% or less on home loans.
What is a good credit score exactly? A great credit score is 770 or higher, but a good one will range between 735 and 750. If you have a credit score of 750 you are still considered an ‘excellent’ candidate for credit by banks and lending institutions. The whole point of having good credit is so that you can make purchases with little or no interest. Have you ever heard the phrase, “it takes money to make money?” If you have great credit then you can invest in your own business without having to put forth your own capital. You can purchase a home without having to pay for it with cash, which almost no one is able to do anymore with the cost of housing.
Another boon of having good credit is that you will pay less for goods and services. The average credit card bill for most people hovers in the $2500-$10,000 range. If you are paying just 12% interest on those purchases over a year, and only paying the minimum payments, then you may as well pay twice, or even three times the amount on everything from a nice dinner out with friends to that new pair of shoes you were dying to take home from the mall.
A great credit score means you can take advantage of sales, great deals and clearance or markdowns, and as long as you pay your bill off at the end of every month, you’ve paid less for consumer goods than the average person. Great credit pays off. Pay your bills on time, and don’t close long-standing accounts even if they have a zero balance. If you look after your credit rating it will pay you back tenfold in return.
{ 24 comments… read them below or add one }
I am finding it really hard to increase my credit score, I think it’s just a bad time for people with bad credit to be applying, since the credit crunch the banks are extremely cautious to lend.
Yeah I am afraid it is indeed a really bad time to be applying for credit at the moment, a lot of banks got their fingers burnt and as the saying goes once bitten twice shy.
Getting new credit isn’t necessarily the way to raise your credit score. In fact, it could lower your score if you’re not careful. The first step to increasing your score should be getting copies of all 3 of your major credit reports. Go over them with a fine tooth comb and watch for errors. If there are errors, dispute them with the bureaus. If there are black marks that are not errors, work on fixing them and see if you can get them removed.
Very good point! I had a friend who was refused credit for furniture. As he was the kind of guy who never let things slip this was a bit of a puzzle, until he applied for his records and found that one had him noted as a female!
What bothers me about credit scores and ratings is that my husband has always paid cash for everything, including cars and big purchases. Our house is paid for and we have no debt, except for what I put on a credit card and pay off each month. Because our credit card is in my name, he has little credit history. He has never paid a bill late. He is far more responsible than I am. I have a great rating. He has little or nothing.
Tabitha this is what makes no sense. How ridiculous that someone with a preference for cash/upfront payments gets penalised. Is there any chance your husband could apply for a credit card in his name?
I agree that this is a difficult time for many of us. That is why it’s even more important to know how a credit score works and exactly what numbers the lenders are looking for. It’s crucial that we know how to take care of our credit score.
I was laid off 3 years ago and my credit cards skyrocked and my credit score plummeted. Now all my debts are paid off and I hope my credit score will start to go back up soon.
The worst thing about credit scores and ratings is that the people who can least afford to pay interest end up paying so much more interest than those who have developed good credit habits. Add all the late fees and penalties, and it’s little wonder so many people are so in debt they might never be able to crawl out of.
I think people should try and avoid credit if they can’t afford to pay it back.
Credit is like anything else, it’s ok as long as it is used responsibly.
I think that is a very good point, there is nothing wrong with debt as long as it is manageable debt, obviously we all need to borrow at some point whether it’s to buy a home or invest in our education or whatever, but it is when we take on debt we can’t afford to repay that the problems arises, it’s all about the debt been manageable as they say.
They really should be teaching this stuff in the school system. Our kids graduate high school and are expected to be out on their own taking care of themselves but they haven’t been taught the basics of how money and credit even work.
I have a fairly healthy credit score. However, though I do, I’ve never taken out a credit card, loan or mortgage as I’ve never liked the idea of owing anyone money. A good credit score doesn’t mean I want to or have to borrow.
I agree that using credit isn’t a crime. There is nothing wrong with it as long as you know your limits and your responsibilities. I know some people though whose are up to their neck in debt.
For long-term unemployed individuals, keeping a good credit score will definitely be a challenge. I had a good credit score until I found myself unemployed for over a year. I realize it is going to take a while to rebuild my score.
I’ve been wondering what the big deal was about having good credit. I know you have to build up your credit, but I didn’t know what a good score was. This is helpful.
It’s scary realizing how a credit score can affect your life. Until recently I believed prospective employers could get a copy of my credit sore. Thank goodness I was mistaken.
When I was much younger, I didn’t understand how important it was to have a good credit score. I took out credit as soon as I could, concentrating on what it would enable me to buy, not how I would pay it back. Now I know better! I think real-life money management skills need to be taught in schools, including understanding credit scores.
I only had one credit card since I started working. I couldn’t pay the interest rates so I had to ask my bank to close my account. Right now, after years of paying my debts, I’m credit card-less and debt-free. I only purchase things using cash. It works for me, but I guess if you really have to have a credit card (or cards), you just make sure you pay your balance before the due date or the amount will triple and it would become too overwhelming.
According to one site that I read earlier that compiles various statistics on credit card usage and debt, the average US credit card debt is $15,596! That is huge! The one thing that I hope comes from this recession is that people start moving away from instant gratification and go back to using cash when they can afford something, instead of plastic when they can’t.
I am right at the thin line of having almost amazing credit and its been a struggle. I swear every few years they switch things up to try and confuse people about the way credit works in this country. I am amazed more people are not struggling right now and maxing their credit to stay afloat.
I would love if the school system actually started courses on this. The most they do (and I have two kids, ages 10 & 5) is teach a child how to balance a checkbook. There is nothing after that and sadly they did not even do that type of thing when I was in school (which was not that long ago).
I had to end up going through a small shop in town that was family run years ago when the debt bubble started so I could work to rebuild my credit. It took a little longer than expected but they were more than willing to help me since it also helped them.