One of the most significant factors lenders look into when considering people for loans is their credit scores. For those whose credit card falls below the average range, it can be tricky to get a mortgage.
Typically, credit scores range from 300 to 850. Lenders have different ideas of what they consider to be a "good" or "bad" credit score. However, ValuePenguin reported an approximation of the categories of credit scores as follows:
- Excellent: 800-850
- Very good: 750-799
- Good: 700-749
- Average: 650-699
- Poor: 600-649
- Very poor: 550-599
- Bad: Below 550
Over 53 percent of the population has a credit score that is above the "good" range. Only 18.4 percent has an "excellent" credit score. Why exactly does a good score matter? Why do people strive for an "excellent" score?
The benefits of an excellent credit score
When people work hard at attaining and maintaining an excellent credit score, they can reap plenty of benefits. Some of these perks include:
- Great credit card options, such as rewards cards and 0% balance transfer cards.
- Low interest rates when taking out loans.
- Better car insurance rates.
- Approval for leases on rental properties.
How to improve your credit score
The best way to maintain and improve one's credit score is to monitor this number over time. Lexington Law reported that, of the 1,000 people they surveyed, 54 percent of Americans do not check their credit score. Checking this score on a daily basis is not at all necessary, but for someone trying to improve their score, checking on a monthly basis can help keep them on track.
Additionally, individuals should understand what factors are detrimental to their credit scores. Knowing what these risk factors are can help them plan to negate this undesirable activity.
To get their credit score into the "good" or "excellent" zones, individuals should make sure the debt they owe stays below 10 percent of their total credit limits. They should also make all of their mortgage or student loan payments on time.
Getting an excellent credit score involves a nearly perfect record, with no delinquent payments on loans or taxes. Just as important as preventing debt is maintaining the strong record. Particularly if someone has a blemish or two on their credit history, they can still get an excellent score, but they will need to work harder for a longer time to do so.
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