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

Significant information that if disclosed would affect an individual's decision. For example, a buyer would probably not enter into a contract with a seller of real property if it was known ...

A written contract of a group of property owners, typically condominium owners, describing their joint ownership obligations and rights. The association agreement usually allows members to ...

Raw land in its natural condition which has in no way been improved. ...

As a suburban nation with the majority of Americans living in the suburbs, the actual classification of suburbs had long been expected. Still, recently, three academic approaches for ...

The down payment on the price of a real estate. For example, it is customary to make a down payment of 10% of the value of a real estate parcel upon signing the purchase agreement. ...

Just to be clear: an Open house is not when you invite friends over to meet your new house. At least not in the real estate world.When you hear someone talking about an Open House, they ...

The government under emminent domain takes Way to determine how much to pay an owner whose property before-and-after method. ...

The concept of a release can define various meanings in the financial and real estate business. Typically, it establishes a discharge or literal escape from a loan borrower's economic ...

The tenant is forced to leave the premises if he complains about the poor condition of the apartment or office space he has leased. This type of eviction is illegal in many states. ...