What is a Good Credit Score? How to Understand Your Credit Report

Last Updated on June 1, 2021

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A good credit score may seem difficult to achieve, but once you understand your credit report it will be easier to fix frustrating problems that are keeping the number low.

credit score

What is a Good Credit Score?

Your credit score is a watered-down summary of your financial life: your payment history, amount of debt, length of credit history, types of credit, and recent applications for credit.  Your credit behavior is averaged out to a number between 0 and 850, and the higher your number, the better you are. Generally, a credit score between 690-719 is considered to be good, whereas any number higher than that is excellent. These kinds of scores are what earn you better deals on mortgages, leases, and credit card rates. The reason for these benefits is because sellers are able to trust that you’ll pay them back, based on your high credit score. If, for whatever reason, you have a lower credit score, ranging from 630-689 — or even worse, below that — a seller might not consider you to be as reliable.

So, How Do I Get a Good Credit Score?

If you’re wondering how to get a good credit score, first you need to have credit. Some people think that the best way to finance their life is to avoid credit cards and pay in cash for everything. But that’s something of the past. Having a credit card with regular payments is the best way to show that you know how to manage your money.

If you’re someone who is bad at remembering deadlines, most credit accounts allow you to automatically set your payments. This will help ensure that you never miss a minimum payment and never lose your good credit score because of a pesky fee. Something important to note is that a late fee can drastically affect your credit score, whether it’s on a credit card payment, a car payment, or your mortgage. Not only will your score suffer, but it’ll remain on your credit report for up to seven years.

Another tip that not everyone knows, but can make a world of difference (and help you get a good credit score!) is that you shouldn’t apply for a handful of credit accounts at one time. It can cause a temporary dip in your score that eventually adds up if you do it enough. Another bit of advice: stay around 30 percent below your spending limit. Low credit utilization can heighten your credit limit as well as your credit score.

Most banks or credit card statements will show you your credit score. As you get older, the negative things that affect your score will matter less as you accumulate positive credit. A perk of opening a credit account at an early age is that the longer you keep it open and active with minimal debt, it will continue to increase your credit score.

According to Credit expert John Ulzheimer, formerly of FICO and Equifax, “Income, balances in retirement accounts, equity in your home, net worth … anything that defines how much money you have or how much you’re worth are not considered by your credit scores.”