Credit Score: A Quick Review

Good credit vs. bad credit. While you might hear about the difference between a good credit score and a not so good credit score, what do the terms “good credit” and “bad credit” really mean?

Since good and bad can be subjective, how do you know where your score falls? And how is your life impacted when you have a high score vs. a low score? Well we are here to help you dive into the difference between these two credit categories and how your score can impact you.

Credit Score Ranges

Your credit score can range between 300-850.  Where your score falls within that range represents your creditworthiness – or how “responsible you’ve been with managing your credit-related tasks”, such as making payments on time, not accumulating too much debt, and continuing to build trust with financial providers. 

You want a good credit score because it follows you throughout different areas of your life, from qualifying for a loan to getting approved for a mortgage or apartment.  A high score makes getting approved for a credit line easier. It’s also less expensive because low-interest rates and high credit scores go hand in hand. So, what are the typical credit score ranges?

According to myFico.com, there are five credit categories. You can see them below:

  • 300-579: Very poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very Good
  • 800-850: Exceptional 

What Is “Good Credit”?

670-739 is considered good credit because it’s what’s acceptable in our society. When your score falls in this range, it’s near or slightly above the average US consumer score. Most lenders will approve your loan, give you an acceptable interest rate, or approve your credit line with this score. If your score is above this range that is even better!

What Is “Bad Credit”?

Conversely, bad credit (at CCFCU, we like to call this ‘Colorful Credit’) is seen as typically falling below 580. This is credit that is well below the average score for US consumers and shows that you’re a risky borrower for lines of credit and loans.

What Does Your Credit Score Mean When It Comes to Lenders and Applying for Credit?

Your credit score can impact various areas of your life. Especially if you plan to borrow money or secure lines of credit for a home, vehicle, or for personal reasons.

Good credit helps you get an approval that comes with terms you can be proud of. This is because lenders trust that based on your credit score, you can manage your debt. Your credit score even goes further than financial lenders. Some property management companies, cell phone companies, and utility companies will check your credit to see whether you qualify or meet specific terms before moving forward with your desired service.

Having a lower credit score can make qualifying for big-ticket purchases and securing lines of credit more difficult and expensive. The same can be true for renting a home since you might not get approved or setting up an account with a utility company without having to make a down payment. 

Over your lifetime, having bad credit will cost you in opportunities and cold hard cash as you pay more.

What Are the Ways to Improve Your Credit Score?

You can turn your credit score from bad to good. It happens all the time. While the steps are simple, implementation isn’t always easy, so having a strategy to remain consistent in your efforts can make all the difference. 

  1. Dispute errors: Review your credit report to determine whether errors lead to a lower credit score than you should have.
  2. Make on-time payments: Pay your bills on time every month. If you can’t afford to make the payment, set up a payment plan. Payment plans won’t hurt your credit but failing to pay altogether will. 

Lower utilization rates: Your “utilization rate” is determined by comparing the balances you are carrying to your available credit. An acceptable utilization rate is around 30%. If you carry higher balances on your credit cards, you want to develop a debt pay off plan to reduce your utilization rate.

It is important that you NEVER pay someone to ‘repair’ your credit.  Anything they can do, you can do.  Need help?  Call us at 432-550-9126.

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This post was written by Alyssa Chavira

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