What is REALLY a Good Credit Score?

Posted On: January 2012

THE KREDIT KORNER WITH THE KREDITGURU, GARY NOVEL

Editor: Tiffany Brewington

Credit……Credit……Credit……Credit……who would ever have imagined that we would be hearing so much about Credit in the news?

Mortgages, Credit Cards, Installment Loans, Student Loans, everything you apply for nowadays is going to use a Credit Score to determine if you get the loan and at what interest rate it will be. Your Credit and Score are also used when you apply for a job, an apartment, a cell phone, even opening a checking account. This Credit Score is based solely on the information contained in your Credit Report. And remember the ONLY Score you should be concerned about is your Fair Isaac Score (FICO).

But what really is a good Credit Score? That seems to be the big question for all consumers as each different industry (mortgage, installment and revolving) is looking for a different target Score. As the economy continues to be in a tailspin, each industry has gradually been raising the Score they are looking for to approve the Credit application. Basically doing what they can to eliminate any type of risk on new loans/credit cards.

As funny as it sounds, the ONLY constant through all of this IS the Credit Score. Its not YOUR Score that has been changing or all of a sudden got bad, the problem is that these companies are looking for higher and higher Scores. I have spoken with many people that have been denied and they thought something happened to their Credit Report when in fact their 680 Score used to be good enough. Now they are looking for 700 Scores. Companies never explain this to the consumer, always making the customer think they did something wrong.

If you have a Score of 680 - 700, make no mistake, this is a GOOD Credit Score. FICO Scores only go up to 840. If you have Scores in that 680 - 700 range you were at one time just about guaranteed of getting any type of Credit you applied for. If your score was over 700, banks would throw money at you. Now, however, you may hear that you do not qualify for a loan and need to get your Scores up.

Remember the old saying “Beauty Is In The Eye Of The Beholder”. Well, that’s what Credit Scores are like as everyone is looking for a different Score and what’s good for one type of Credit may not be good for a different type. A Credit Score may look good for some credit but not as good for other types of credit.

For example, with one type of Credit, a 700 Score may be good for a low interest rate, but for a different type of Credit, you may NOT even qualify with that same 700 Score.

I have heard that credit card companies, that routinely review your accounts on a yearly basis now use those reviews to determine if your current Credit Score justifies the credit limit that was set years ago when your were originally issued the card. With credit card companies, they have the right to do whatever they want, whenever they want and they do not have to notify you of any changes to your account.

In the past few months, I have been in stores, waiting to check out when the person in front of me uses their credit card and has it declined. I can overhear the conversation with the customer surprised and shocked that the card was declined. Then after its declined the second time, the customer calls the credit card company and is told that her limit was reduced by 90%. I just close my eyes and feel sorry for the person as I know exactly how the conversation is going.

So now, not only does your Score effect your ability to obtain new credit, it also can have a major impact on your credit limits and interest rates on accounts that you may have had for over 10 years, even if you NEVER missed a payment.

However, the question remains, “What’s REALLY a Good Credit Score?”

I feel the answer to that question varies for each individual as everyone is in a different situation. If you apply for credit and your Score comes back at 600 and you get approved, isn’t that a good Credit Score?

If another person applies for that same type of credit and their Score comes back at 750 and they get approved but at a lower interest rate than the other person, isn’t that a good Credit Score?

Both of the examples were approved for the same credit but at a different interest rate so didn’t both of them have a good Credit Score? Or would it have been better for the first person to be denied the credit?

So what seemed an easy question is really not that easy to answer. As a consumer, we are at the mercy of the companies that issue credit for us to live our lives and there is nothing we can do about what Score they are looking for.

My thoughts are that a good Score is any Score that gets you approved for the type of credit your are applying for. And no matter WHAT your Credit Score is, it can always be better. And the better that Score is, the more money you save.

For all your credit-related questions, contact Gary Novel, President of Kreditguru, Inc at 630/624-9557 or kreditguru@aol.com

Posted On: January 2012

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