What is a Good Credit Score?
You might visit one of the three credit reporting agencies-Experian, TransUnion, and Equifax-to find out your credit score. Once you have your score in hand, however, how do you know what the number means? What’s considered a good credit score varies from lender to lender. As a result, you have a bit of wiggle room regarding whether your score can be labeled as good.
Typically, any number above 700 indicates sound financial behavior and can therefore be considered a good score. Most credit scores fall between 600 and 750.
At our car dealership, serving Brockton, Randolph, and Stoughton, we’ve compiled some facts and figures that can impact your credit score and change its classification from good to satisfactory or from satisfactory to bad. Let’s explore in more detail what these numbers mean and what can affect them.
How Your Credit Score is Calculated
Credit scoring formulas take a number of factors into account when determining your overall score, including:
- Your total debt. It makes sense thathaving too much debt will lower your score. What might surprise you, though, is that having no debt often lowers your score since, in those cases, there isn’t enough information for the scoring formula to accurately determine your creditworthiness. Therefore, it’s best to have a small overall amount of debt.
- The type, age, and number of credit accounts you hold. Older accounts with payments made consistently on time score the highest.
- The number and seriousness of any payments you’ve missed. Making payments on time, all the time, scores the highest. If you miss a payment, take care of it as soon as possible to boost your score.
- Public records. Any delinquencies here will adversely affect your score.
Credit scoring formulas don’t consider your age, race, religion, nationality, sexual orientation, occupation, salary, employment history, or residential location when determining your credit score. They also don’t consider certain types of credit inquiries, like promotional inquiries that creditors make when trying to promote their credit cards to you or consumer disclosure inquiries that you make when finding out your own credit score.
How the Credit Scoring Formula is Calculated
Credit scoring formulas are created by:
- Looking at the credit profiles of a large sample group, typically numbering more than a million people. This historical sample group can be used as a model to compare your credit behavior against.
- Noting the commonalities between the profiles in the sample group.
- Developing a statistical formula based on these common variables.
- Weighing each variable in such a way that the formula can accurately predict future behavior. This allows the credit formula to determine your creditworthiness based on the likelihood that you will behave a certain way financially in the future. Your credit score is a numerical representation of this predicted creditworthiness.
Experian, TransUnion, and Equifax have each developed their own credit scoring formula. As a result, your actual credit score number will often differ between the three agencies but will be within a fairly narrow range. If you score well with one reporting agency, you’ll likely score well with the others.
Still Not Sure if You Have Good Credit?
If you’re not sure if your credit is good enough to own a car, Chrysler Jeep Dodge Ram 24 can work with you. Give our finance center a call or contact us online to learn more.