What is a Good Credit Score?

Your credit score has a direct and critical effect in the interest rate you will be paying when you apply for a loan. That's the foundation lenders use to determine if you will be able to pay off the amount in the future and when they calculate their inherent "risk quotient." Thus, it's a good idea to know what qualifies as a good credit score.

Credit scores range from 340 to 850. Creditors determine the value by reviewing your payment history, aggregate/individual amounts that you owe, the length of your credit history and the types of credits you have used, including new credit.

If your credit score is over 700, by all measures, you have a good credit score. This means you are more likely to receive other financing options and better interest options.

By most estimates, approximately 60% of Americans have a good credit score. This means that while many of us are doing well, there are others who need to improve their debt value a bit. Should you be one of those who got a lower rating, don't worry because you still have a chance to improve it. Start by paying off your debts, particularly if most of these are reflected in your credit card bill. The best approach is to deal with the credit card that has the highest interest rate then work your way down.

If you foresee a problem with making a payment, you should contact your creditor regarding the situation so a payment arrangement can be made so late payments will not be reflected in your credit report.

It's nice to have many credit cards but if you have a hard time keeping up which ones were already paid, don't even think of getting another one as this can lower your credit score. You also shouldn't close unused accounts because a zero balance can also work to your advantage. By the same token, people with good credit scores should never open new accounts especially if their credit history is less than 3 years old.

If you feel that there is something wrong with any instance in your credit report, you should immediately call your lender because it's certainly possible that a mistake was made or, even worse, a case of identity theft has taken hold.