What is a Decent Credit Score? Find Out Here.
Scratching your head trying to understand how your credit score is calculated and wondering even more what is a decent credit score?
If so, it’s time to get on top of your finances.
Read on to finally get an answer to the question “what is a decent credit score?”
We’re also sharing some practical advice to help you improve your credit and get on your way to becoming a money master!
How Your Credit Score Calculated.
Before we answer the question “what is a decent credit score?” let’s talk about how your credit score is calculated.
Your credit score is based on data gathered from three different credit reporting agencies (CRAs) — Equifax, Experian, and TransUnion. Not all creditors and lenders report all three CRAs, so your score from each of them will often vary slightly.
These CRAs look at a variety of factors to determine your credit score, including the following:
- The number and type of accounts you have
- Your available vs. used credit
- Length of your credit history
- Payment history
Each factor carries a different amount of weight for your total credit score. A typical breakdown looks something like this:
- Number of accounts: 10-12 percent
- Type of credit used: 15 percent
- Available vs. used credit: 30 percent
- Length of credit history: 5-7 percent
- Payment history: 35 percent
As you can see, there’s a lot that goes into calculating your credit score. It’s no wonder so many people are clueless.
What is a Decent Credit Score?
In addition to being confused about how their credit score is calculated, many people end up scratching their heads when they’re asked, “what is a decent credit score?”
If you’re in this boat, things are about to get a lot clearer for you.
Your credit score is a three-digit number that ranges from 300 to 850. Generally speaking, a score of 700 or higher is considered a decent score.
Most people won’t have trouble being approved for a loan or credit card if their score falls somewhere above 700.
If your score is below that, you can still qualify for loans and credit cards. But, your interest rate may be higher as a result.
Watch This Short Video From Experian to Learn More About What Is A Good Credit Score
Tips for Improving Your Credit Score
Now you know the answer to the question, “what is a decent credit score?”
How does yours stack up? If your credit’s not where you’d like it to be, don’t worry.
Give these strategies a try to start improving it today.
Check Your Credit Report
Are you part of the 37 percent of Americans who don’t know what their credit score is? If so, your first step is obtaining a copy and finding out where you’re at.
There are many websites out there that will let you check your credit score for free.
in addition to learning your score, you can also check your report to make sure there aren’t any errors there that are negatively affecting you.
Once you notice an error, such as an incorrectly listed late payment, you can dispute it with the credit bureau and improve your score.
Reduce Your Debt
This is a lot easier said than done. But, reducing your debt is essential to improving your credit score.
Some tips for reducing debt include:
- Reduce your credit card utilization (your balance should be less than 30 percent of your limit)
- Evaluate your budget and look for places where you can cut spending
- Create a payment plan and prioritize paying off credit cards with higher interest rates
- Pay off credit card debt completely rather than moving it from one card to another
- Avoid opening new cards just to increase your available credit
It takes time to reduce debt. However, it’s definitely possible if you establish a manageable plan and stick with it.
Stop Missing Payments
You can’t change the past. But, if a poor payment history has contributed to your low credit score, make sure you’re doing the following things to avoid problems in the future.
One of the first things you can do is set up payment reminders so that you don’t forget when your bills are due. Many banks allow you to set up email or text reminders through their online portals.
You may also want to set up automatic payments so that you don’t have to worry about missing due dates.
There are a lot of misconceptions out there about late payments.
For example, many people believe that payments that are just a few days late don’t affect credit scores. Other think that paying off collection amounts remove them from your credit report. In reality, though, those amounts stay on your report for seven years!
If you’re having a hard time making your payments, try to contact your creditors to talk about reducing your monthly payments. You can also look into working with a credit counselor.
These steps won’t automatically improve your score. But, they’re still a step in the right direction.
Consider Refinancing Your Student Loans
If student loan debt is negatively affecting your credit score, you may want to look into refinancing.
Refinancing doesn’t eliminate your student loans altogether.
But, it will reduce your interest rates and help give your score a boost over time.
Limit Your Applications
Many retail stores will offer you a discount if you sign up for a store credit card. But, you should resist the urge to take them up on this deal. This is especially true for people who are trying to repair their credit.
Every time you apply for a card, your credit takes a hit, whether you’re approved or not.
The hit is small, about 3-5 points. But, it can still have a big impact on your score, especially if you’re on the edge of two credit score tiers or have applied for a lot of cards in a short period of time.
You now have an answer for when someone asks you “what is a decent credit score?”
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