The modern-day economy runs on credit. This means that if you want to obtain a mortgage for a house or a loan to pay for your college tuition fees, or even if you just want to eat lunch using a credit card, you’ll need to find a lender that will issue you a line of credit.
You will also need to ensure that you are worthy of receiving that line of credit. Worthiness for credit is defined using your three-digit credit score rating and this is the ultimate key to your financial prosperity. Having good credit can be the main determining factor in whether you receive a car loan, student loan, or mortgage.
Having bad credit makes it exceedingly difficult to obtain a credit card that has a low-interest rate. It is also undoubtedly more expensive to borrow money when you have bad credit, regardless of the purpose of your borrowing.
Even if you are not in the financial market to obtain a loan, good credit still has a significant impact on your life options. Insurers, landlords, and employers will often assess your credit information in order to ascertain whether you are responsible and reliable. Having bad credit can suggest that you are a riskier candidate.
Your credit score technically only showcases the ways in which you have dealt with and managed your debt. However, some extrapolate specific characteristics from your financial activities and apply this to other scenarios. Having good credit signifies that your financial situation is on the right course. This results in your credit score influencing your insurance rates, job approvals, and whether or not you can rent the apartment of your dreams also.
In order to obtain a good credit score, you need to understand why good credit is so vital and how you can build a strong credit score yourself. This will help you to reap the benefits of having good credit. This article outlines what you need to do to obtain a good credit score and stipulates what is considered to be a good credit score below. If you are looking to repair your credit rating, then you should read this Lexington Law Firm review.
What Is A Good Credit Score?
According to the FICO credit scoring model, credit scores can be classified using five distinctive categories:
- Poor Credit: 300-579
- Fair Credit: 580-669
- Good Credit: 670-739
- Very Good Credit: 740-499
- Excellent Credit: 800-850.
The good credit score range includes credit scores that are between 670 and 739. Because of this, most people will consider ‘good credit’ to be any FICO score that is more than 670. This means that if you fall into the perfect credit or excellent credit categories, you will be considered to have good credit by default.
Another bonus of having your FICO credit score over 670, is that you move your credit from “subprime” to “prime”. Thus, those with good credit are far likelier to benefit from prime interest rates. This means that you are also far less likely to pay high amounts of interest on your mortgages, loans, and credit cards.
What Are The Other Benefits of Having Good Credit?
There are numerous benefits to having a good credit score. Landlords are far likelier to rent you their apartment. Potential employers may also review your credit score as part of their hiring processes, which means you are more likely to land your dream job. Despite these bonuses, the biggest benefits of having good credit are undoubtedly financial.
Easier Credit Approval
If you have a good credit score, lenders and banks are way more likely to approve any applications that you make for lines of credit. This means that whoever you apply for mortgages, loans, or credit cards, you are more likely to be accepted. You will also spend far less time waiting to hear whether your application has been successful or not.
How Do I Get A Good Credit Score?
If you want to have a good credit rating, you will need to understand how to calculate credit scores and how to build credit accordingly. A FICO credit score consists of five key factors:
- Length of credit history: 15%
- Credit mix: 10%
- Recent credit inquiries: 10%
- Payment history: 35%
- Credit utilisation: 30%
Focusing on these five individual factors and improving your overall credit habits will help to improve your FICO credit score.
To conclude, it is vital to have a good credit score if you want to obtain low interest mortgages, loans, and credit cards. Employers and landlords may also assess your credit score in order to ascertain whether you are a reliable individual overall. I hope that you have found this article to be insightful. Thank you for reading.