credit score - Paramount Equity®Savvy consumers are aware of the importance of their credit score. Some learn how important their credit score is through their own trials in life. If you are like some, you may have applied for a loan in the past and learned that your credit scores are too low to qualify. Others have been fortunate enough to read about the importance of credit scores on their own, or they have learned this lesson from family or friends. While many people are aware that it is important to have a good credit score, few understand what a good credit score actually is.

What the Numbers Mean

If you pull your own credit report or a lender gives you a peak at a credit report they have pulled, you may see that you have a score that ranges from 300 to 850. It is rare for anyone with established credit to have a score below 400, even if they have filed for bankruptcy, have numerous collections accounts or other negative events on their credit report.

What’s a Good Credit Score?

A good credit score is considered to be 650 or higher. This generally means that you have paid minimum monthly payments on your debts as agreed and have avoided carrying excessively high debt balances. However, credit scores are calculated based on an analysis of a number of factors. So it is possible to have a couple of minor negative events, such as a late payment or a minor collections account, and still have a good credit score.

What’s a High Credit Score?

A very good credit score is about 700-750, and an excellent credit rating is considered to be over 750. To reach these high ratings, you generally will have to avoid negative credit events altogether. If you do have late payments or other events, generally they are several years old. Further, account balances are low, and the number of trade lines open may be minimal.

Your credit score is a reflection on the risk a lender faces when lending to you. It takes into account your payment history, how many revolving credit lines you have, how long you have been establishing your credit history and the number of credit report pulls you have had recently. By monitoring these activities, you may be able to improve your own credit rating. Keep in mind that a good to excellent credit rating can help you receive the best terms when applying for financing. A credit report may also be reviewed you when apply for employment or when you apply to rent a new home or apartment.