What is a Good Credit Score?
With there being a few different credit reporting systems it can be confusing understanding what each means and why they differ so much.
You should think of credit reporting this way – if two different teachers gave you the same exact assignment in school then graded them you would probably end up with similar yet different grades. Credit is the same way. Two systems will weigh different criteria more or less heavily than another. Most institutions checking a credit scores will use scores from bureaus commonly known. Some of the discrepancies may also be due to the fact that not all lenders report to all the different credit reporting agencies according to CreditKarma.
There are three major credit reporting bureaus – Equifax, TransUnion, and Experian. All three have different scales or models for scoring you. You’re allowed one free credit score per year but there are tools like Credit Karma, which is free, and other paid tools that you can use to monitor your credit score.
Tips to Keeping or Gaining Good Credit
- Pay your bills: One of the easiest ways to maintain good credit is paying your bills on time. If bills are being turned into collection agencies it gets reported to the bureaus and this will lower your score. If you’re in a situation where you may not be able to pay a bill on time try calling your lender and working something out that way missed payment don’t put a ding in your credit.
- Get your free credit score: You’re allowed one free credit score per year. This also allows you to make any corrections if needed.
- Try making any purchases that require credit checks together: Believe it or not when many lenders check your credit at various times it may lower your credit score. If you’re planning on purchasing a car and applying for a new credit card try doing this in a close time frame.
- Learn about the things you didn’t know would affect your credit: Did you know closing out a major credit with a lot of history can affect your credit negatively?
- Pay down debt: Credit is all about proving you’re responsible enough to pay it back. When you pay back debt it improves your scores.
Good vs. Bad Scores
In short depending on the reporting agency or bureau your scores will range. What you should be concerned about more is high vs. low scores. Most of the scores range from 300 – 850. Any score on the lower end of the spectrum is considered poor with the higher end considered excellent.
Credit scores can affect meeting life goals so they’re important. If your score isn’t exactly where you want it to be you can get there by paying off debt and paying bills consistently. Overtime you’ll get where you want to be. Most credit bureaus also only look at history over seven year periods so a poorer scores will not last forever.