What is Considered a Good Credit Score?

What is Considered a Good Credit Score?

According to Investopedia, a credit score is a number between 300 and 850 that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, repayment history, and other factors. Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner.

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How Does Credit Score Works?

Credit score plays a key role in a lender’s decision to offer credit. People with credit scores below 649 are generally considered to be subprime borrowers, that is borrowers who are considered to represent a higher risk to lenders.

Below is a chart that shows the various credit scores range and its grade.

Credit score rangeGrade
750 to 850Excellent
700 to 749Very good
650 to 699Good
550 to 649Fair
300 to 549Poor

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How is Credit Score Calculated?

Credit score is obtained from the information major credit agencies like Experian, Equifax, and TransUnion gather information. To compile a report, these credit-reporting agencies collect information from credit card companies, financial institutions, and lenders.

Credit scoring models examine credit report data and assign a numerical score to each factor. Some criteria will be highly influential, while others will only account for a small percentage of your overall score, depending on the model. As a result, even if they use the same credit report, different scoring models will produce different credit scores.

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Although credit score ranges differ based on the credit scoring model, scores of 650 and more are generally considered good.

Originally posted on April 28, 2022 @ 1:30 am