What is a good credit score in 2015? That is, a score that gives you a reasonable shot at being approved for mortgages, personal loans, auto financing and credit cards? A score that doesn't dump you into those marginal lower tiers or embarrass you when you apply for credit?
If your credit score is good because you're improving your credit from "fair," congratulations; you're moving in the right direction. However, if your score has slipped from "excellent" to good, it's time to get disciplined and raise your score before things get too serious.
Good Credit Score: What's it Worth?
Experian, one of the three main credit bureaus in the US, says that consumer credit is considered "good" when it hits the 700 level. LendingTree's LoanExplorer tool classifies scores between 700 and 739 as "good." Other scales consider scores in the 680 - 720 range to be "good." Having a good credit score in 2015 should get you a pretty good rate for a mortgage. For example, as of this writing, a mortgage applicant with good credit and 20 percent down could get a home loan with an APR (annual percentage rate) of 3.827 percent. However, a person with "fair credit" applying for the same loan with the same company gets an offer of 4.158 percent. That's a difference of $61.03 per month for a $320,000 mortgage, and in five years the person with "fair" credit will pay $3,662 more than you!
What about auto loans? According to MyFICO.com, those with good credit are offered on average a 4.694 percent rate for a 48 month auto loan. Those with excellent credit get 3.343 percent, and those in the fair range get 6.682 percent. And credit cards? A search among LendingTree's credit cards for people with good credit turns up rates as low as 10.99 percent. Excellent credit rewards you with a lower rate of 9.99 percent, but drop into the "fair" range and that increases to 17.99 percent!
And personal loans? Rates for peer-to-peer, personal and signature loans range between six and ten percent for the highest quality borrowers, up to 16 percent for "good" applicants and rise to about 24 percent for those with "fair" credit.
How to Raise a Fair Credit Score
If you have fair credit and want good credit, it's not hard to achieve. Credit scores don't improve overnight, but following these tips can help.
- Check your credit score -- easy and free at LendingTree.
- Question and resolve inaccurate information as necessary.
- Pay down as much consumer debt as possible -- bring your balances to 30 percent or less of your available credit.
- Do not close accounts. This could lower available credit and harm your score.
- Continue to use your credit for small purchases and pay your balance in full each month.
- Of course, make every payment on time. Know that even if you incur a late fee for missing a due date, you'll still be okay credit-wise if you don't pay more than 30 days late.
So now you know the answer to "What is a good credit score?" and can put that knowledge to work. With all the benefits a good credit score provides, it's definitely worth the effort to get it there. And once you've acquired good credit management habits, you should have little trouble making it all the way up to "excellent."