If you have read anything about credit scores, you probably have heard of all the horror stories and complications regarding managing credit and stories of loan sharks knocking on the doors of people who are deep in debt, unable to pay back their loan. Fortunately, if you are one of the few people who are educated on how to manage your credit, and basically know what a good credit score is, it can ensure you financial security and prevent any complications from happening before it even starts.
What is a good credit score?
A lot of people debate about what is a good credit score. For some people, any credit score above 600, in their eyes, is already considered a good credit score. While for others, people contend that any credit score above 700 is considered a good credit score. For those who do not know, the highest credit score a person can get is 850, which is considered a perfect credit score. Despite all the ruckus on what is a good credit score, the person who decides what is good or bad, is your creditor. If you were to ask me personally, I would say anything above 700 is considered an excellent credit score. Reason being, we have been hit by a great depression, which tends to cause banks to become more picky because they want to ensure the individual is able to pay them back.
Benefits of having good credit
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While a lot of people articulate that it is a must to have a good credit score, a lot of people do not know why. Having a good credit score can save you tremendous amounts of money when you are in need of a loan and for the heck of it, many people obey good practices to build up their credit score even though they do not currently need it. This is a wise move on their part. The reason is because having a good credit score has that much of an impact on your loan and can save you tens of thousands to up to hundreds of thousands upon a house loan depending on the value of the home and your credit score. The difference between a credit score of 600 to 700, can already translate into several thousands already lost. Also, if you plan on buying a car with a loan, in that scenario, having a good credit score can save you money as well. Another fact about credit scores that many people do not know about is that your credit score can also impact the insurance rates you receive. It has been said that about 92/100 auto insurers from a most recent survey published by the research firm Conning & Co, are now using credit information to decide whether to issue a policy on your car and it has been said that home insurers are now starting to use credit information. To summarize, having a good credit score is an asset and therefore, there is literally no reason why you shouldn’t try and build up your credit score when you get the chance to. People would kill to have a good credit score that it is scary.
Here is a example of a 30-Year Fixed Mortgage for a house valuing at $500,000.
| FICO Score | APR | Monthly Payment |
|---|---|---|
| 760-850 | 4.460% | $2521.56 |
| 700-759 | 4.682% | $2587.18 |
| 680-699 | 4.859% | $2641.49 |
| 660-679 | 5.073% | $2705.54 |
| 640-659 | 5.503% | $2838.95 |
| 620-639 | 6.049% | $3013.84 |
As you can see, the difference between even a single decimal number may look like its effect on your monthly payments is minuscule, however, don’t be fooled.
Best practices for your credit score
The federal Fair Credit Reporting Act (FCRA) requires that U.S. consumers be entitled to a free credit report each year. The government’s goal is to make sure that consumers stay informed, fight identity theft, and get fair treatment. So be sure to exercise that right and take advantage of your annual free credit report made exclusively from the government, and see what is going on with your credit score. I also recommend that you start your free trial from CreditReport.com to monitor your credit activities, or just to receive your free credit score.
