Definition of "What is a good credit score?"

In 2020, our credit score is an essential and integral part of our financial lives. Replacing outmoded concepts like a good reputation and an unbroken word of honor, this relatively new system encapsulates your entire financial history in one golden, all-important number. For young people or those who happen to have spent their entire adult lives under a rock, the concept of a credit score can be a bit of a tough concept to grasp

If you have recently tried to buy a house, a car, or even something as seemingly insignificant as a television on credit, chances are you have undergone a credit check and not even known it. In this credit check, everything you’ve purchased or borrowed on credit will be considered. Based on this history, you’ll be given a three digit number that can mean the difference between financing on a brand new Mercedes S-series and a beat up 15-year old Chevy Impala.

Is my credit score good or bad?

Now, you’re probably wondering what a good credit score looks like, and how your credit score stacks up to this magic number. First of all, you’ll need to check your credit score. This is pretty simple, but you can find a quick and easy guide by clicking the link above. Once you’ve done this, you’ll have your magic number, and you can compare it to the mythical “perfect” score. 

It’s worth noting that this is just an average number, not a concrete threshold. Typically, a credit score of over 700 is excellent and enough to get approved with very low interest rates regardless of what you are trying to purchase. However, every retailer, dealer and broker of goods and services has their own thresholds and limits regarding credit. The “ ideal” credit score is simply an average of the mean numbers used by firms to appraise someone’s credit. 

The most highly regarded model of calculating credit scores is the VantageScore 3.0 model. This model allows for highly accurate and reliable predictions that can consistently assess the risk of default or late payments based on one’s credit score. The VantageScore 3.0 model groups credit scores into five groups on 0-850 scale. A credit score of between 781 and 850 is considered super prime, a score of between 661 and 780 prime, a score between 601 and 660 near prime, a score between 500 and 600 subprime and a score of 499 or less deep subprime. If you want to check your credit score using the VantageScore 3.0 model, Credit Karma is a great free resource that allows you to check your credit score according to this highly accurate and widely accepted model. 

In practice, these credit thresholds actually vary from company to company and are far less concrete than they initially might seem. Companies have something of a sliding rule when it comes to credit scores, accepting customers and adjusting interest based on how likely you are to miss payments or default entirely. For example, if you were trying to buy a car with a credit score of 690, you might be accepted and given a 7.5% interest rate. However, if you tried to buy the same car with a credit score of 550, you might still be accepted, but given a higher interest rate of 11% or more.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Questions

Popular Real Estate Glossary Terms

Legal order for a person to present at a deposition or trial documents in his possession, such as related to a real estate transaction. ...

When a real estate owner wants to know what their property tax liability is, they calculate the assessment ratio for their property. An assessment ration is a relationship between a real ...

Removing a debt by making full payment. A mortgage discharge is a document formally specifying that a mortgage debt have been paid. It is typically recorded in a local property deeds ...

An increase in the income tax basis of a property that is a result of a tax-free exchange. As a result of an inheritance, for example, the basis of the inherited property was stepped up to ...

City apartment building that is overcrowded, poorly constructed or maintained, and generally part of a slum. In law, a tenement also refers to possessions of an individual that are ...

The meaning of a development impact fee or impact fee defines a one-time cost the local government imposes on a brand new or planned development project (regularly on a property developer.) ...

Limited period of time granted by state law to an individual who has had his or her property foreclosed on and sold to regain possession of the property by repaying the debt that was ...

New cost less accumulated depreciation to date. ...

The meaning of the term tort outlines a wrongful act resulting in injury or damages. For example, trespassing on someone’s private property can end up destroying a part of it. ...