Monday, November 2, 2015

What is a "Good" or "High" Credit Score?

"Do you know your credit score?" Throughout your financial life, many people will ask you this question. Whether you were taught or learned through experience, it doesn't take long before you realize how important your credit score is. However, while many people know that a good credit score is invaluable to securing a credit card or loan, few understand what a "good" credit score actually is.

What Does That 3-Digit Number Mean?
When a lender, bank or credit institution pulls your credit report, the credit bureau associates a score with your account. Since there are three credit bureaus (Experian, Trans Union and Equifax), you'll actually have 3 scores. Your score will range between 300 to 850. If you have established credit, it is likely your score will be above 400 even if you have a variety of negative factors like a recent bankruptcy, late payments or numerous collections. Sometimes, people who have no credit history will have a very high score however this is usually considered to be negative by lenders because they have no way to assess how well the person will manage credit given to them.

What’s a "Good" Credit Score?
For most industries, a "good" credit score is considered to be 650 or higher. This kind of score is associated with people who have paid minimum monthly payments on debts and have avoided carrying excessively high debt balances. It's important to note that credit scores are calculated by assessing a variety of factors such as credit history, types of credit and more. Therefore, if you have a few minor negative events, such as a late payment or a small collections issue, it is still possible for you to have a "good" credit score above 650.

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What’s a "High" Credit Score?
As you probably know, a "high" credit score give you more opportunities for higher credit limits and lower rates. A "very good" credit score ranges from 700-750, and an "excellent" credit score is considered to be over 750. To reach these high ratings, you will need to avoid negative credit events altogether. These include bankruptcies, foreclosures, late payments, collections, high balances and more. If you do have a negative such as a late payment or minor collection, they are likely to be several years old. In addition, the types of credit accounts are well rounded and account balances are low.

Keep in mind that having a high credit score does NOT mean that you don't use credit at all. It means that you manage it WELL and that makes your risk very low in lender's eyes. Your credit score is a reflection of this risk. By taking the steps necessary - such as paying down balances, paying on time, paying more than the minimum payment and making sure your credit is well rounded - you can improve your own credit rating.We encourage everyone to work with a mortgage professional to ensure that they are on the right track with their credit profile so that a home loan is within reach when you decide to buy or refinance.

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Midwest Equity Mortgage, LLC

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All information provided in this publication is for informational and educational purposes only, and in no way, is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Midwest Equity Mortgage, LLC does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Midwest Equity Mortgage, LLC do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

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