Credits 101: What is a good credit score?

Before I start explaining the difference between a good and bad credit score, lets take the time to figure out what exactly a credit score is and when exactly it is used.

It doesn’t matter if you are a student applying for a student loan or a middle-aged citizen wanting to buy a car but don’t have the financial assets for it. Having a good credit score will essentially support your life as a member of society since it can lead to a lesser cost having to be paid on borrowings. Evidently, you are much more likely to achieve your goals through financial support from lenders by having a good credit score.

To keep matters simple, here’s outline of all the things that will be discussed in this guide:
- What is a credit score?
- The difference between having a good and bad credit score
- An example of a good credit score
- How to achieve a good credit score?

Feel free to jump to any paragraph that is most suited to your question.

What is a credit score?

A credit score is a three-digit number that determines the possible credit risk you have if you lend money from a lender. It looks at your credit history and decides whether or not you have a good or bad credit score based on previous borrowings and paid/unpaid bills. Using this three-digit number, lenders will be able to predict with correct precision whether you as the borrower will be able to repay the loan over a given span of time. The lender can then decide whether to provide you with a loan or reject your request. They will also be implementing a percentage of interest rate based on your three-digit number.

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The difference between having a good and bad credit score

A low credit score is considered a bad credit score, whereas a high credit score is seen a good credit score. A perfect example to illustrate the difference between having a good and bad credit score is the percentage of interest rate you’ll be paying on top of your loan. It is obvious that a low three-digit credit score will evidently lead to a high interest rate, but a high three-digit credit score will lead to a low or even (in some situations) no interest rate.

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An example of a good credit score 

The majority of people range between a value of 600 and 800. To get the most favorable interest rates, you’ll be aiming at having a score of 720 or higher. Having a score that is below 500, will evidently lead to a much higher interest rate, varying between 2% and 4%.

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How to achieve a good credit score?

If you are having trouble with a low credit score and you are aiming to boost it up, there is always a solution. Here are some points of advice that can positively affect the primary source of you having a low credit score.
- Pay your bills on time. 
- Minimize the amount of money that you owe to lenders. 
- Establish your previous credit.  
Keep these points in mind and you’ll be fine having a good credit score. We hope that we have informed you well.

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