What Is A Good Credit Score?

Once upon a time, a good credit score was anything above 600. With a score of 600, it was possible to have a judgment on one’s credit profile and still be considered a good credit risk. It was even possible to have a couple of credit cards with an occasional late payment without a potential creditor blinking an eye. Two or three maxed-out credit cards? No problem. It was even possible to buy a home with a credit score of 600! Those days are long past.

In our current economic climate, creditors are exercising more caution in granting credit. If a person has had a judgment in the past five years, even if it was paid in full two years ago, a creditor is going to be extremely cautious. A person can’t pay their credit cards late more than once and expect to be granted a loan. And even one credit card at or near its limit will significantly reduce one’s chances of getting another credit card. Buying a home in any but the most constrained markets is going to require a credit score of 700, unless the buyer is bringing a 30% down payment to the table.

A C-level credit score is in the 720s. A person with a score in that range is near capacity on the credit cards, has zero judgments, and no late payments. This means the guy who’s feeling fairly confident in his economic condition because he’s paying all his bills on time has only an average credit score. Then what does it take today to have a “good” credit score.

First of all, credit history at least three years old. Secondly, the revolving credit (two to three accounts, maximum) will ideally have high limits and low balances. This is called “high capacity” in the credit world. It means other creditors have deemed the person capable of handling a large amount of credit and the person hasn’t used all that available money. That old saying, “You have to have money to get money” is also true in the credit world.

The third component of a good credit score in this economic environment is a solid payment history on a signature loan (car payments, school loan). Finally, there can’t be a lot of inquiries on a credit report. There are two kinds of inquiries, “soft” and “hard.” Soft inquiries are those triggered by oneself, an insurance agent, a rental agent, or an employer. These inquiries are not going to result in an action that may drive down a credit score. Hard inquiries are those triggered by potential creditors: credit card or loan applications.

The above is a picture of the new “good,” credit score of 750.