What is a Good Credit Score?

If you have ever had by any chance applied for a loan, then you would readily know, the importance of a good credit score, especially if your loan application has been turned down due to lack of proper credit score. As it is, credit score plays a very pivotal role not only in procuring a debt, but in shaping your financial standing, as well as your goodwill in the market.

If you do not have any idea of what a credit score is all about, then I would like to take this opportunity to tell you about it in detail. As it is, credit score refers to a numerical value, which is arrived at by way of comparing the information, which is provided in your credit report to the same information of other people. This value is formulated by way of using some standard comparison scale. This value, or credit score, is an exact expression of your credibility status.

As it is, this scale ranges from 300 to 850 points; and are very commonly used as an effective means to figure out if an applicant is credit worthy or not. In most cases, applicants with higher credit scores are generally offered credit at lower interest rates, as in comparison to those applicants, who are having lower credit score.

These credit scores are used by several banks and financial institutions, in order to analyze the credibility of the applicant. However, these credit scoring patterns vary greatly in the formulation process of credit scores. This paves way for a lot of confusion. In order to take care of this confusion, the FICO scoring pattern was introduced. This process was introduced by the Fair Isaac Corporation (FICO), in order to arrive at a credit score, by way of using definite standard scales for different parameters. As it is, this FICO score has been adapted by almost all credit scoring institution, in order to promote uniformity in the calculation of the credit score of an applicant.

Now, while a good credit score for different sectors may be different, generally a FICO credit score of 700, or above is considered to be good enough. It is therefore, better for you, to maintain a credit score of around 700 points. Several factors are responsible for affecting the credit score of an applicant. As it is, one of the most important factors, which affect your credit score is your payment history. Your payment history includes information in regard to payment details on your credit cards, as well as your retail accounts. It also takes into account details regarding late or missed payments, apart from public records like suits or bankruptcies.

As it is, a credit score can prove to be an effective way of determining the credibility of a borrower. It lowers the risk of bad debts and defaults, which are faced by the lending institutions.