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What Is a Good Credit Score?

A Credit Score Could Affect Job Opportunities

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Today, major credit bureaus generate your credit score based on how much debt you have, your credit card or personal loan repayment records, credit utilization, and even the frequency of your loan applications. A credit score is the measure of your financial credibility to lenders. So, if your credit card or loan application was rejected, it may be due to a poor credit score.

The biggest advantage of a good credit score is that you would be seen as a financially responsible person. This could significantly improve your chances of securing loans and credit cards. In fact, according to the Fair Isaac Corporation's (FICO) official website, 90 percent of lenders check credit scores before approving loan and credit card applications.

While this alone might already be quite an advantage, there is also much more to it. A good credit score might come across as a favorable attribute that landlords look for in tenants and employers look for in job applicants. You might also be able to secure low-interest premiums for your insurance policies with a good credit score.

What is a Good Credit Score According to a Major Credit Bureau?

Major credit bureaus use (FICO) models to create your credit score to evaluate your creditworthiness.

Fair Isaac Corporation created the FICO scoring models with most of them in the range of 300 to 850. Experian, a major credit bureau, shares that a credit score in the range of 740 to 799 is considered very good, and anywhere between 670 and 739 is good. Credit scores of 800 and above are deemed to be exceptional. These figures might vary based on reports from other institutions, though.

These Actions Could Lower Your Credit Score

On the flip side, your credit score could tank if you miss credit card or loan repayment deadlines, apply for loans too many times, or max out your credit card balance. It is also important to note that these incidents could stay on your credit profile for years and affect your financial credibility for that tenure.

The credit utilization rate, which measures how much of your available credit balance you spend on average, is important. If you keep maxing out your credit card, lenders might assume that you have trouble managing money. If you fail to make your monthly credit card or loan payment for more than 30 days, lenders might even report you to credit bureaus. This could lower your credit score by several more points.

Applying for credit cards too many times may result in certain consequences, as well. When you apply for a loan or credit card, lenders go for a hard pull inquiry to retrieve your credit information. These inquiries stay on your credit report for a while and can be viewed by lenders for that duration.

Too many hard pull inquiries might portray you as a high-risk borrower. In contrast, soft pull inquiries, like when a company runs background checks on you or when you check your credit score, will not affect your credit score.

How to Increase Your Credit Score

To start working on improving your credit score, you must know where you stand and skim through all previous inquiries for erroneous entries. A recent Consumer Reports survey of nearly 6,000 volunteers found that 34 percent of them had at least one error on their credit reports.

Today, fintech can help you remove these errors, as well as offer credit monitoring services to notify you of any incorrect entries or inquiries on your credit profile. You might also want to start prioritizing your credit card and other high-interest debts because of their impact on your credit score.

While many fintech companies generate free credit scores and offer credit monitoring, Credit Karma is growing fast with a user base of over 100 million people. They will fetch your credit score for free from the top two credit bureaus, TransUnion and Equifax. They also offer free credit and ID monitoring services to keep you up-to-date on any changes to your credit report.

Check your credit score for free today.

The contents of this article is for informational purposes only and does not constitute any financial or investment advice. It's important to perform your own research and consider seeking advice from an independent financial professional before making any banking or investment decisions.

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