Toni Coleman Brown

What does an excellent credit score really mean?

Many people want to know what does an excellent credit score really mean? And to put it plain and simple it means that you will pay less for everything. You will pay less on your loans when you have excellent credit because you will have lower interest rates.

But what exactly is a credit score anyway?

A credit score is a simple 3 digit number that tells lenders how likely you are to repay a loan. It is used by banks and lenders providing mortgages and car loans, and by credit card companies to determine, whether or not offer you credit. And most importantly it is used to help determine the terms of the loan or the interest rates. The scale of credit score runs from 300-850.



Your score is based on five basic factors and they are as follows:

  • 35% is based on how well you pay your bills.  This is the largest category and it carries the most weight.  It matters how well you pay your bills and if you pay on time.  This calculation is done on a rolling 24 month basis, which means that the minute you begin to do the right thing, it makes an impact on past negative behavior.
  • 30% is based on how much credit you have available.  This is why it’s important to pay down your debts to a point in which they’re well below the credit limits.
  • 15% is based on the length of your credit relationships. It’s important not to close any credit cards accounts and this is the reason why.  15% of your credit rating is based on the length of your credit relationships.  So if you’ve had credit cards for a long time.  That’s a good thing.
  • 10% is based on new credit.  At the end of the day it matters that someone will want to give you a new credit.  The fact that you can get new credit will positively impact your score.  If you can get a new card and not use it, then that will work in your favor.
  • 10% is based on the makeup of your entire file.  The overall picture that your credit file paints will impact your score, so things like long relationships, a history of paying on time will impact positively.  But a long-term history of paying late, defaulting on loans, will negatively impact your score.

What’s the perfect credit score number? And What does an excellent credit score mean?

A decent credit score falls with the range of 700 or more.  A credit score of more than 800 or above is excellent.  Having a high credit score rating means great interest rates.

So, how do you fix bad credit?

There are several ways you can repair your credit.  You can pay someone to do it.  But most people are private and don’t want to talk to strangers about their finances.  You can do it yourself by following a DIY program.  Click here to find out more.

 

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