What Is a Good Credit Score?

Credit scores are essential indicators of your financial health. For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above is considered excellent. In 2023, the average FICO® Score in the U.S. reached 715.

Achieving a good credit score can help you qualify for a credit card or loan with a lower interest rate and better terms. Different lenders use their own criteria for deciding whom to lend to and at what rates. Here’s more on what qualifies as a good credit score, what impacts your credit, and how to improve your credit score.

What Affects Your Credit Scores?

Several factors can affect your credit scores, and these are often split into five categories:

• Payment history: Making on-time payments on your credit accounts can help your scores. Missing payments, having an account sent to collections, or filing bankruptcy could hurt your scores.
• Credit usage: This includes how many of your accounts have balances, how much you owe, and your credit utilization rate—the portion of your credit limit that you’re using on revolving accounts.
• Length of credit history: This category includes the average age of all your credit accounts, along with the age of your oldest and newest accounts.
• Types of accounts: Also called “credit mix,” this considers whether you’re managing both installment accounts (such as a car loan, personal loan, or mortgage) and revolving accounts (such as credit cards and other types of credit lines).
• Recent activity: This considers whether you’ve recently applied for or opened new accounts.

Why Having a Good Credit Score Is Important

Having good credit can make achieving your financial goals easier. It could be the difference between qualifying or being denied for an important loan, such as a home mortgage or car loan. And, it can directly impact how much you’ll have to pay in interest or fees if you’re approved.

For example, the difference between taking out a 30-year, fixed-rate $250,000 mortgage with a 620 FICO® Score and a 670 FICO® Score could be $161 a month. Over the lifetime of the loan, having the better score would save you $57,842 in interest payments.

Additionally, credit scores can impact non-lending decisions, such as whether a landlord will agree to rent you an apartment. Some employers may review your credit reports before making a hiring or promotion decision. And, in most states, insurance companies may use credit-based insurance scores to help determine your premiums for auto, home, and life insurance.

How to Improve Your Credit Scores

To improve your credit scores, focus on the underlying factors that affect your scores. At a high level, the basic steps you need to take are fairly straightforward:

• Make at least your minimum payment and make all debt payments on time. Even a single payment made 30 days or more late can hurt your credit scores and it’ll stay on your credit report for up to seven years.
• Keep your credit card balances low. Your credit utilization rate is an important scoring factor that compares the current balance and credit limit of revolving accounts such as credit cards.
• Open accounts that will be reported to the credit bureaus. If you have few credit accounts, make sure those you do open will be added to your credit report.
• Only apply for credit when you need it. Applying for a new account can lead to a hard inquiry, which may hurt your credit scores a little.

Other factors can also impact your scores. For example, increasing the average age of your accounts could help your scores. However, that’s often a matter of waiting rather than taking action.

Why Choose O1ne Mortgage?

At O1ne Mortgage, we understand the importance of having a good credit score and how it can impact your ability to secure a mortgage with favorable terms. Our team of experts is here to guide you through the process of improving your credit score and securing the best mortgage for your needs.

Contact us today at 213-732-3074 for any mortgage service needs. Our experienced loan officers are ready to assist you in achieving your financial goals.