Money Smarts

Is your credit score good or bad? Make it excellent.

Your credit scores are treated differently by different lenders.

A few months ago, I had a reader who sent a Facebook message asking if her credit score was good. She stated a friend explained how a 676 credit score wasn’t good. Her friend added the score needed to be above 700 to be considered good.

She had a parent cosign for her apartment and is a co-borrower on an auto loan. Her parents asked her to refinance her auto loan under her own name. Before applying for an auto loan refinance, she started asking friends about credit scores. She discovered the mobile app, Credit Sesame, in our Facebook community, and got her free credit score. Her friend also told her to get her FICO score through myFICO.

After accessing her credit scores, she felt a great deal of stress. What is considered a good credit score to get approved for an auto loan by herself?

We talked a bit more and learned she had a limited credit history and lacked credit variety (too many credit cards and not enough loans…yes that’s a thing). She also only started using credit two years ago after graduating college. This reader didn’t have delinquencies or collection accounts on her credit report.

She noticed with both apps her scores were different. I noted that Credit Sesame uses the VantageScore credit score and myFICO offers the traditional FICO score. What was more important is to understand where she falls in the credit score range.

Is your credit score good or bad?

The credit score range varies and does change often. Typically it’s 300-850 for both VantageScore and FICO credit scores. But, there are variations in the scoring models used. Some credit score ranges go up to 950 and some even over 1000. The scores you get from the three credit bureaus will also vary.

There isn’t “one” credit score used by lenders or organizations. In fact, you could get your FICO score through myFICO and that could be different from a score given to you by a creditor (for instance Discover Card offers free credit scores) that uses FICO scores.

Again, the important part is knowing where you fall in the credit score range. Generally, anything over 650 is considered good credit and if you’re above 700 you’re entering into very good and excellent credit range. If you haven’t checked our credit report and score guide, that’s a great place to start to learn about credit.

Why knowing your credit score matters

It’s good to know where you stand with credit scores before applying for any loans or credit. Knowing your credit score can give you the upper hand when applying for a loan. It can even help you find better lenders and negotiate for better terms. Keep in mind lenders decide what score is considered excellent. Some lenders underwriting guidelines may consider a 740 an excellent score while other lenders consider a score above 680 for their best rates.

Regardless of the scoring systems used, one thing to note is that the lower your score, the higher the risk that lenders see. Therefore, you might find it harder to get approved for an auto loan refinance or get the best rate.

Your credit score and financial wellbeing

Having a healthy and strong credit score is part of financial wellness. It’s an important number to know and to monitor. But it isn’t indicative of your overall financial health. Credit scores are important if you’re seeking out future credit (and of course some companies who require a credit score to offer their services). Chances are sometime in the future you will need credit to buy a house or a car.

It can be daunting trying to understand every credit scoring methodology. But you don’t have to know all the nuances.

Monitor your credit report with free apps that let you know of changes happening to your report monthly and gives you free scores. The scores you get are helpful to determine where you fall in the range. If you’re in the “poor” range, understand what factors to impact to improve your score.

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Jason Vitug

Jason Vitug is founder at phroogal, creator of the award-winning project the Road to Financial Wellness, and author of the bestseller and NY Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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