This article will cover the fundamentals of knowing what is a good credit score for my age. and how to evaluate if you have good or terrible credit, and how to improve your credit scores.
Despite the importance of credit ratings, many individuals misunderstand their nature and calculation.
Your credit affects every part of your life, often in unexpected ways. For instance, a strong credit score unlocks reduced mortgage, auto loan, and certain insurance rates, as well as lower credit card rates.
Some businesses also use credit scores to make recruiting and promotion choices, so having a strong credit score has a significant impact on your career earnings.
What is a credit score?
First, let’s discuss what a credit score is and what it is not. It is a number that indicates the likelihood that you will repay your debts.
Before approving you for a mortgage, your bank or credit union will consider your credit score, for instance.
If approved, the rates you are eligible for are directly proportional to your credit score. Lower interest rates correspond to higher credit scores and vice versa.
To determine whether or not to lend to you, banks and credit card issuers conduct credit checks.
However, rather than the lenders themselves, third parties provide the credit scores.
How is one’s credit score determined?
Your credit score is determined by a number of things. Here is how it operates:
The Fair Isaac Corporation (FICO) uses internal algorithms to calculate your credit scores.
They base these credit scores on information from the credit bureaus about your past and present financial behavior as reported by your current creditors.
Length of credit history, the amount owed, and payment history all factor into the calculation. However, FICO’s exact formulas are a closely guarded secret.
How often will your credit score change?
Your credit score fluctuates constantly based on your actions. It is common for it to fluctuate monthly or even daily as creditors report new information.
To put it differently:
Your creditors give the credit bureaus information about how you’ve paid in the past and how much you owe now.
- Credit scorers use the information on your credit report in conjunction with other information about you to calculate your credit score.
- Your credit score is a “grade” for your financial responsibility.
- New creditors will then use your credit scores to determine the likelihood that you will make future payments.
What are the different credit score ranges?
There are currently several different types of credit scores available. However, the only ones that truly matter are your FICO scores.
There are a variety of FICO scores used in the mortgage, auto, and insurance industries, but the most important thing to remember is that FICO is the leader in credit scores.
The FICO score range is 300 to 850.
Some other ways to score credit and the ranges they use are:
- PLUS Score: This credit score is not used by creditors. Instead, the purpose is to inform consumers about their credit risk levels. The PLUS score can range between 330 and 830.
- TransRisk Score: as the name suggests, TransUnion created this score. It is used to predict the risk associated with new credit accounts, not your ability to pay current bills. The range of TransRisk credit scores is between 100 and 900.
- Equifax Score: like the PLUS score, this is an educational tool. The range of credit scores is from 280 to 850.
- VantageScore: VantageScore is the only additional credit scoring model used by lenders. It was created by the three major credit bureaus to compete with the FICO score.
- The credit score: range for the current version of VantageScore is the same as that of FICO: 300 to 850.
What is a good credit score for my age?
The answer to whether a credit score is “good” or “bad” depends on the type of credit being sought and the maximum acceptable interest rate.
For something relatively small, such as a personal loan or credit card, there is a wide range of acceptable credit scores.
Mortgage lenders, on the other hand, typically require that your average FICO score from all three credit bureaus be at least 640. With a credit score of 640, you will be subject to high interest rates that will increase your monthly mortgage payment by hundreds of dollars.
Here are some general rules about what makes a good credit score and what makes a bad credit score:
- Excellent credit: 781–850
- Excellent credit: 661 to 780
- Average credit: 601 to 660
- Low credit score: 501 to 600
- Bad credit: below 500
While excellent credit scores, or even a perfect credit score of 850, are desirable, you will likely qualify for the best rates on anything with a score in the mid-to-high700s.
See also: Improve Credit Score Quickly 10 Credit Hacks
If you want an idea of what credit score you’ll need in various situations, continue reading.
What credit score is needed to rent an apartment?
Before offering a lease, landlords typically check the credit history of prospective tenants to evaluate the risk involved.
Additionally, you should search for any outstanding collection accounts, such as unpaid rent from a previous apartment.
If you cannot meet this requirement, you will likely need a cosigner on your lease.
So, someone with a 615 credit score would have issues, but if you have a 635, you’re probably fine.
In areas with a high demand for rental properties, you may also be required to pay a larger security deposit.
If your credit score is low, you may also be required to pay both the first and last month’s rent before your lease is approved (below 620).
What’s a good credit score for buying a car?
Car dealerships are famous for their “no credit, bad credit, any credit!” slogans to entice people to buy a new car.
However, the great deals advertised on television are typically reserved for individuals with “super-prime” credit ratings.
The following is a general breakdown of interest rates for new car loans:
If your credit scores fall into the deep subprime or subprime categories, there is a chance you won’t be able to obtain any financing.
But, as the table above shows, if you can get financing, the rates will be much higher.
If you want the best rates on a new vehicle, you should aim for a credit score of 680 or higher.
If you want to be approved for a car loan with a reasonable interest rate, you should aim for a credit score of 620 or higher.
What is a good credit score for buying a house?
As previously stated, if you intend to purchase a new home, the mortgage lender will examine your credit history.
Whether or not you can get a mortgage depends on more than just your credit score.
Only people with a credit score of at least 720 can get the best mortgage rates.
Some exceptions may be made for individuals obtaining FHA or VA loans. For instance, FHA loans only require a credit score of 580, whereas VA loans have no minimum credit score requirement for mortgages.
However, these numbers are misleading because neither the FHA nor the VA provides loans.
Instead, they insure loans for the banks that do the actual lending, primarily mitigating default-related risk.
Even with this insurance in place, a credit score below 620 will likely prevent you from qualifying for a VA or FHA loan.
What’s a good credit score for a credit card?
Credit cards are the most versatile form of credit for which you may qualify. If you want an excellent interest rate, no annual fees, and numerous perks, you’ll need a credit score of at least 720.
With a credit score of 640, you can qualify for a decent credit card if all you want is a card with a good rate.
How can I Learn my credit score?
Nowadays, many credit card providers give their clients free FICO scores. Some even offer non-customers a free credit score.
You can purchase your VantageScore credit scores from the VantageScore website.
You should therefore confirm the quality of a credit score before paying for it.
The only other way to obtain your credit score is by applying for a credit card or loan.
How can I raise my credit score?
If your credit score is not high enough to qualify you for the types of credit you deserve, there are several things you can do over time to improve it:
- Make payments on time. Even six months of timely payments can have a substantial effect.
- Lower your ratio of debt to income. To create breathing room, attempt to pay off credit card balances and reduce loan balances.
- Pay off credit cards that have been maxed out. Your credit utilization ratio is a major consideration. Lenders will perceive you as a high-risk borrower if you use all of your available credit. Therefore, reduce your balances until you have used no more than one-third of your available credit limit.
- Remove any mistakes from your credit report. This includes delinquent payments, charge-offs, and accounts in collection. Dispute any inaccuracies you find on your credit report with each credit bureau, or hire a reputable credit repair expert to do it for you.
Bottom Line
Understanding how to obtain a good credit score is an essential first step toward financial independence.
FAQS Related to What Is a Good Credit Score for My Age?
1. What’s a good credit score for a 22-year-old?
The average credit score for individuals in their 20s is 660. Between the ages of 20 and 29, customers begin to construct their credit ratings. average credit score by age 22
These consumers may have a student credit card with a low credit limit and are making payments on their student loans.
2. What is the average credit score by age?
Your credit score is a three-digit number that indicates your track record of repaying loans and credit lines.
People over the age of 18 are assigned credit ratings by credit bureaus to reflect their creditworthiness.
3. How do you check your credit score?
Many individuals believe that if you check your credit reports from the three national credit agencies, you will also see your credit ratings.
However, credit reports from the three national credit agencies do not often include credit ratings.
Credit scores are derived from the information included in credit reports.
