What’s Considered An Excellent Credit Score? (And How To Get There)

By James Young on January 14, 2014
What’s Considered An Excellent Credit Score? (And How To Get There)

Having a less-than-stellar credit score can become problematic in a variety of ways. For example, it can make getting a loan difficult in addition to making it hard to rent an apartment and expensive to buy car insurance. Not to mention the fact that some employers take your credit rating into account when considering you for a job. Therefore, having an excellent credit rating is important. To learn more about credit ratings, what’s a good one and how to raise yours, continue reading below:

What is a credit score?

Put simply, your credit score is a measurement based on your payment history. Its purpose is to help lenders determine how likely you are to pay back a loan. Your actual credit score is tabulated using a formula created by the Fair Isaac Corporation, hence the name FICO score.

What does a credit score mean?

You may wonder how much of an impact your credit score can have on your life. In short, your credit score can greatly impact many aspects of your life. For example, a good credit score will mean you qualify for the best loans in regards to interests rates and loan terms.

Because interest rates can greatly affect a loan payment amount, the interest rate will greatly affect how much money you have to spend each month for your home, car or other important items.

This in turn will greatly influence how much money you have available for other things in life, which means overall your credit score can have a huge impact on your lifestyle.

What is an excellent credit score?

Now that it is apparent how important it is to have a good credit score, you may be wondering if your credit score is considered good. The median credit rating in American is 720.  For an explanation of what is considered bad, good and excellent credit and what that means to you as a borrower, read below:

  • Credit score below 620: A credit score of 620 or lower places you in the “sub-prime” borrower category. If you are considered a sub-prime borrower, you will likely pay 3 percent more on a mortgage loan than someone with excellent credit and will likely pay double-digit interest rates on a home equity loan or a line of credit.
  • Credit score of 620 to 674: This credit score range is still considered below optimal. If your credit score falls in this range, you will likely pay 2 percent more than borrowers who boast excellent credit ratings.
  • Credit score of 675 to 719: If you find yourself in this credit score range, you should find it relatively easy to procure a good loan. You will typically pay up to half a percentage point more than a borrower who has excellent credit in regards to a loan.
  • Credit score of 720 and above: If you possess a credit score at or above 720, you have an excellent credit score. This means you will be able to acquire a lender’s most favorable rates and you are in the position to shop around thus finding the best loan for you in regards to term, interest rates and other factors.

How to make your bad or average credit score excellent:

Now that you have learned the importance of a good credit score, you are probably wondering how to improve yours. Read below for some easy-to-apply tips:

  • Acquire a credit card from a major company (Visa, MasterCard, etc.): Before you go crazy with this tip, it is important to note that using a credit card and keeping a balance on one is two totally different matters. Running up a bill that you don’t pay in full won’t help you build credit. Therefore, this tip takes discipline, but having a credit card you use and pay off monthly is an easy way to improve a poor credit score. A great way to implement this tip is using a card to pay for gas and paying it off monthly.
  • Get a prepaid credit card: If you don’t trust yourself to use a credit card wisely or just don’t want one, get what’s called a prepaid credit card. This gives you a way to use a credit without the temptation of running up debt as it will only allow you to spend the amount that you have placed on the card and no more.
  • Be patient: Although it is difficult, it is important that you understand the process of repairing your credit won’t happen overnight. Slow and steady wins the race when it comes to repairing a credit score.
  • Check your credit score: It is important to make sure that your credit report is accurate. Therefore, checking the three credit bureaus, those being Equifax, Experian and TransUnion, on a regular basis is wise. You want to know if anything incorrect is on your credit report so you can rectify the situation before it damages your credit.

Follow the above tips to improve your credit and thus improve your life situation. Remember, you can do it, so don’t give up!

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About James Young

My name is James Young- I love red wine, sailing, and playing guitar. I believe that everyday is truly a gift. I'm blessed to live five minutes from the sand in the beautiful city of Long Beach, CA. When I'm not assisting homeowners, you'll find me belting melodies with friends around a campfire, wandering the halls of an art exhibit, or watching ESPN re-runs until the sun comes up. So what am I doing here, you might ask? In a couple of sentences- I'm passionate about empowering first-time and experienced home buyers to make their dreams a reality. Whether it's saving thousands on your home loan, buying your first home, or acquiring your first investment property, I'm always here to help. Don't hesitate to ask questions, and please remember to "share the love"! :) #loveloans #loverealestate #lovelife!