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What Is A Good Credit Score
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By: Chuck Machado Email Article
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I get asked all the time, what is a good credit score, and like everything else in life, my response is, it depends. For most people a credit score above 700 is generally considered to be a good score, but if you are emerging from bankruptcy, it may take a while to raise your credit score above 500. At the higher end of the spectrum is a credit score above 800. In the old days, AKA, six years ago, an 800 credit score was pretty common, but not anymore. The credit score range is 300 to 850 and most consider anything above 700 to be good credit. The problem is that each agency has their own way of calculating a credit score.

Then, there is the question of which of the three major credit reporting agencies are you talking about?

Before we begin, please try to remember that you are not your credit score. Yes, you may have had hard times. You may be the victim of an economic downturn and you may have even fallen behind on your bills, but a credit report score does not define the person you are. It is merely an indicator of how likely it is that you will be a good credit risk in the future. Credit scores are dynamic, which means they change every day. Yesterday's 500 might be tomorrow's 600.

Here's a refresher on your question, what is a good credit score.

There exist three major credit reporting agencies in the United States. Each is charged with gathering and reporting the buying and spending habits of individuals who use credit. Since most people are not able to plunk down cash for large purchases, like a home, people rely on the leverage of credit for ownership. This type of spending extends to every day purchases too. Cars, electronics, travel and college, are items being financed. Interest rates are issued depending on risk.

The three major credit reporting agencies are Equifax, Experian and Transunion. If you purchase anything on credit, your credit report score will be recorded in one or all of these databases. Though your score will never be the same from each, your spending habits as well as how timely you pay your lenders are part of the credit matrix which ultimately is defined by a credit report score.

Listed below is a rough explanation of the credit score scale and how your credit report scores are determined. Keep in mind that you are in control of your credit score. Depending on how you handle your finances will determine how much you pay in interest rates.

Approximately 35% of your score is based on your payment history.

Are you late in paying your bills or are you on time? Have you filed bankruptcy? Keep in mind that certain consumer debt, like credit card purchases, are amortized daily. This debt is deadly and best paid earlier than 30 days.

Approximately 30% of your score is based on how much you owe.

there is a formula used that calculated the amount of debt you are allowed to have and how much of that credit you have used up. This ratio is very important as it tells an important story of how well or poorly you are living. If you are relying on credit to finance your lifestyle or if you are a casual user, this is important to lenders. Try to keep this debt to credit ratio under 30%. That means if your credit card limit is $5000, don't carry a balance of more than $1500 at any given time.

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Chuck Machado is with the commercial finance company CMA Capital Funding Inc, located in Southern California. He writes extensively about loans, debt, and commercial financing. If you have questions or comments, he encourages his readers to contact him through his website

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