If you want to rent an apartment, finance a car or get a mortgage, your credit score comes into play. A good credit score affects how landlords, lenders and banks treat you.
Understanding credit score ranges
The range of credit scores runs from 300 to 850. The higher your score, the better. Scores under 600 may cause problems in securing credit, while scores between 600 and 700 may allow for loans only at higher interest rates. Scores of 700 and above are considered good, while scores over 800 are considered excellent. Those with good or excellent credit are more likely to qualify for loans and receive favorable terms.
If you have a good score, you can be confident when applying for a loan. If you’re on the lower end of the credit score range, it's good to know what to expect when applying for credit. Also, it is never too late (or too soon) to take steps to repair your credit score.
What factors effect your credit score?
Your credit score is based primarily on these factors:
- Payment history — Paying bills on time consistently will greatly improve your overall score. If you are 30, 60 or 90 days or more late with a payment, it will be documented. A history of late payments on several accounts will cause more damage than late payments on a single account.
- Amounts owed — This category measures the amount you owe relative to the credit available to you by any given lender. If your debt is more than 30 percent of your total credit limit, your credit score may begin to fall.
- Length of credit history — The longer you’ve had established credit, the better you’ll look to a lender. Be wary of opening multiple new accounts in the hopes of building credit quickly. This reduces the “average account age” and will reduce your score.
- Amount of new credit — Every time you apply for new credit, that inquiry becomes part of your credit report. Prospective lenders will notice if there have been too many inquiries on your report in a short amount of time.
- Types of credit — Credit cards and installment loans (like mortgages and car loans) represent different types of credit. Having a balanced mix of well-managed types of credit can benefit your credit score.
Being proactive about your credit health can put you at an advantage when making major purchases. Learn more about how to build and maintain a good credit score.
Have more questions about credit? Make an appointment with one of our bankers and make sure you are on the right track to good credit health.