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What is a credit score?
The ability to pay back debt determines the quality of life of almost every American. The three numbers of a credit score indicates if you can borrow money to start a business or to buy items and property. But sometimes it can be hard to make sense of the rating metrics alone. Is 669 a good credit score? Is a credit score 680 good enough? Read this blog post to find out what a good credit score is and how to increase it.
What is a good credit score?
What is a good credit rating? It starts at 661 for VantageScore or 670 for FICO. With this score, you’re considered a creditworthy consumer. This means you can borrow more money at a lower rate. By the way, the creditworthiness of Americans is steadily growing every year. Whereas in 2020, the average rate among the U. S. citizens was 703, in 2021, it rose to 716.
Ranges of credit score
Now, let’s figure out what is the range of a credit score. It’s a scale from 300 to 850, with a score below 600 indicating you are a highly unreliable customer. Obligees rely on two types of ratings: FICO and VantageScore. They are pretty similar but have slightly different range scales. For example, FICO splits debtors with bad, acceptable, good, very good, and exceptional ratings. Unlike its competitor, the agency has two types of good credit rates and one bad. VantageScore has the opposite. The company ranks creditors as very poor, poor, acceptable, good, and excellent.
Source: “Finance Jar”
Source: “My FICO”
How many points is a good credit score for FICO and VantageScore? The first company calculates that you can repay a loan on time with a rating of 670-739. For the second, you need a score of 661-780.
What is the difference between VantageScore and FICO score?
FICO (Fair, Isaac, and Company) has been on the market for over 65 years. The company was founded in 1956 in Montana. Since 1958, FICO has been rating creditworthiness and becoming a trusted industry leader. The agency’s experts are constantly improving their methodologies and have released their ninth formula version.
VantageScore was launched in 2006. The agency is rapidly increasing its presence on the market, and its main strength is the use of machine learning. Today, the most current credit scoring formula is version 4.0.
Both competitors are proven good credit scores rating companies. Their evaluation methods take almost identical indicators into account. The payment history, account age, number of loans, recent borrowing, and types of credit are among them. Note that these two companies estimate the weight of each factor differently when compiling their rankings. Despite the differences in methodology, the two companies’ ratings show similar results. Therefore, what is considered a good FICO score will also be good for VantageScore.
What affects your credit scores?
The definition of credit check includes several indicators that we have mentioned above. Now let’s take a closer look at how exactly these 5 factors of creditwothiness affect your score.
- Payment history. This indicator analyzes how many loans you have paid off in total. If you have successfully repaid several loans without delays, the lender understands that you are a reliable debtor. So they are more likely to give you a larger loan next time.
- Amounts you owe. This factor determines how much you owe and how you use your credit. We recommend not reaching your limit but spreading the debt across different accounts to get a good score. The more available credit you have, the better your score.
- Types of credit you owe. This grade indicates the diversity of your loan types. You are likelier to get a high score with a wide credit variety. Got a mortgage to buy a house? Good! Bought a phone on credit and leased a car? Great!
- Your credit age. This factor counts how long you’ve had a credit account. The creditor needs to understand that you’ll be a responsible borrower in the long run. So, we recommend keeping old credit accounts instead of constantly opening new ones for a good score.
- Your credit mix. The more credit balances you have, the better it is for your creditworthiness.
How to improve your credit score fast?
Many debtors wonder: “How long does it take to improve a credit score”? The experts say that despite monthly data updates, it can take up to nine months to recover a good score after a late payment. We have prepared some helpful tips on how to improve your credit score. If you cannot achieve a good score for a long time, follow these simple steps.
- Pay off your debts asap. In case you are already behind on your next payment, don’t let it go to waste. Even if you are 30 days late with your loan, it will not affect the rate as much as 90-day delinquency.
- Pay your bills on time, every time. Do you think a creditor would trust you with a new loan when you’ve been irresponsible with your previous ones? That’s why we kindly suggest you not miss the deadlines.
- Keep your credit card balance well below the limit. We’ve already mentioned that the ratio of your limit is analyzed in the rating. So, use your credit only when necessary. Our advice is to borrow small amounts and gradually increase your credit limit. Remember that debt of three thousand dollars may be rated differently by a debtor with a limit of five thousand and one whose limit is ten thousand.
- Check out your credit reports on a regular basis. Forewarned is forearmed. Always keep an eye on your balance and payment deadlines to avoid unpleasant surprises. Also, the more often you check your account, the more often your score is updated.
And while the tips mentioned above are pretty easy to follow, keeping track of your creditworthiness rating appears to be difficult in practice. If you are a client of various banks and have some different loans, the risk of miscalculations increases significantly.
To avoid problems with creditors and better your credit score, use budgeter online from Saldo Finance. With many built-in features, this tool allows you to manage your income and expenses efficiently. Monitor your spending, loans, utility payments, subscriptions, and income from multiple sources in one app. In addition, the program collects your accounts from all banks registered in the United States to track them online.
The developers have also taken care of the app’s security. Like bank security systems, the budget app sync bank account and has multiple layers of protection for personal data. You no longer need to check different resources to assess your finances. Entrust your worries to Saldo Finance and watch your monthly credit rating improve.
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