Credit Score

Credit Scores: Good vs. Average

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The question, "What is a good credit score?," is not always easily answered.

Credit scores can vary between the three credit bureaus, but generally speaking, a credit score above 700 qualifies as good, and a credit score of 700 or higher is usually considered excellent.

The difference between a good credit score and an average one goes beyond numbers — having a good credit score, for example, can mean more dollars in your pocket, while having a bad score can cost you money. That's why it's important to know the facts about your credit score before applying for any type of loan or credit and, if possible, know which bureau your lender uses.

How your credit score affects interest rates

The higher your credit score is, the more you can save in interest on mortgages, auto loans, home equity lines of credit and credit cards.

Even just a few points one way or the other in your credit score could mean a difference of thousands of dollars when you're paying off a mortgage over 30 years. And the savings that a high credit score typically offers can then be applied toward retirement savings, college funds, cars, vacations, healthcare needs or even day-to-day expenses.

An average (or even bad) credit score is not a death sentence

Your credit score can change almost constantly. Every time you pay a bill — whether you pay it early, on time or late — that information is added to your credit history and factored into a credit score. (Obviously, on-time payments are going to help your credit score more than late payments will, but that should go without saying.) It's important to remember that a credit score is just a snapshot of how your credit worthiness is measured at that moment in time — not forever.

The Federal Trade Commission website offers tips on how to better manage your credit history, including commonsense ideas such as creating — and sticking to — a budget; disputing errors that may appear on your credit report; contacting your creditors about developing a workable payment plan; and hiring a credit counselor if you need help dealing with debt.

Of course, the first step to managing your credit is to check your credit report and score.

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