Finance Basics: What Is A Good Credit Score
It's a common question, and one that is easily answered but harder to dissect.
If you've just begun investigating your credit rating, and discovering how you can check your credit reports and discover your own score - it's a legitimate concern. Is my score a good one? Should I be aiming to improve it?€
General consensus agrees that a €good€ score to aim for is 720 or more.
How does one come up with this figure though? What compromises your rating?€
Your score can be broken down into five categories, and these are payment history, amounts owed, length of your credit history, new credit and the types of credit in use.
Here's the percentage breakdown to make it clearer:€
The basic score range is determined by an institution known as FICO (Fair Isaac Corporation) who built an exact formula to come up with €scores€ based on the above breakdowns.
If you were curious, the perfect score is 850, but trust me, this is essentially impossible to get. As I've already mentioned, you should be aiming to hit the 720 or more range. This puts you in an A or B category (A = excellent, B = good) for your rating, which is highly useful when applying for loans via banks and credit institutions.
There are many benefits to having a positive rating, the most common being you get a better interest rate and you don't need to come up with a huge downpayment to secure the loan.
Although increasing your score is €easy€ on paper, in practicality it means creating good financial habits.
Your credit rating can be increased if you follow these simple steps with consistency:€
- Always pay your bills and loan repayments on time (set yourself reminders if you need to)
- Get a comprehensive credit report to ensure there are no errors
- Don't max out the balance of your credit cards (aim to only hit around 30% of your credit limit within the month before paying it off).
Those tips alone will begin to dramatically improve your score, but it needs to be done over the long term.
Click here to find out more about what makes up a credit score and the best ways you can go about checking your own.
If you've just begun investigating your credit rating, and discovering how you can check your credit reports and discover your own score - it's a legitimate concern. Is my score a good one? Should I be aiming to improve it?€
General consensus agrees that a €good€ score to aim for is 720 or more.
How does one come up with this figure though? What compromises your rating?€
Your score can be broken down into five categories, and these are payment history, amounts owed, length of your credit history, new credit and the types of credit in use.
Here's the percentage breakdown to make it clearer:€
- 35% - Payment History
- 30% - Amounts Owed €
- 15% - Length of Credit History
- 10% - New Credit
- 10% - Types of Credit in Use
The basic score range is determined by an institution known as FICO (Fair Isaac Corporation) who built an exact formula to come up with €scores€ based on the above breakdowns.
If you were curious, the perfect score is 850, but trust me, this is essentially impossible to get. As I've already mentioned, you should be aiming to hit the 720 or more range. This puts you in an A or B category (A = excellent, B = good) for your rating, which is highly useful when applying for loans via banks and credit institutions.
There are many benefits to having a positive rating, the most common being you get a better interest rate and you don't need to come up with a huge downpayment to secure the loan.
Although increasing your score is €easy€ on paper, in practicality it means creating good financial habits.
Your credit rating can be increased if you follow these simple steps with consistency:€
- Always pay your bills and loan repayments on time (set yourself reminders if you need to)
- Get a comprehensive credit report to ensure there are no errors
- Don't max out the balance of your credit cards (aim to only hit around 30% of your credit limit within the month before paying it off).
Those tips alone will begin to dramatically improve your score, but it needs to be done over the long term.
Click here to find out more about what makes up a credit score and the best ways you can go about checking your own.
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