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What is considered a good credit score?

The days of easy credit are gone. But, the days of bad credit report information are still here. Bad credit info with tight credit is a recipe for financial disaster.

What is credit?

Ask yourself, when you give someone credit, what does that mean? Basically, you are giving them the benefit of the doubt.

If we change doubt to debt, credit means giving the benefit of the debt. With this understanding, anyone can extend credit, you, a bank, a company, a government, a charity, etc.

Any of these can extend credit by giving you the benefit of debt. To get bank credit, you need to understand how they determine how much credit (or debt benefits) to give you. This is the basis for the credit score.

Do you know how to use a strawman to improve your credit?

A strawman is a term for the legal entity that represents you on your credit report. Since credit, credit reporting, and credit scores are legal activities, they must be performed by a legal entity. That entity is the strawman, a legal representation of the physical being that is you.

Understanding how to use your strawman in credit will help you to manipulate the credit reporting agencies to get the best and cheapest credit terms when dealing with lending institutions.

Understanding how to use your strawman is the difference between getting $1000 and $1 million from a lending institution. But, it starts with knowing what is being said about your strawman on your credit report.

Expensive credit vs. cheap credit.

Like many other things in life, credit has a price, it is called interest. When you use credit, you want it at the lowest price. Low-priced credit purchases include homes, cars, or any loan with collateral.

High-priced credit is anything coming from a credit card (including debit cards).

As strange as it may sound, banks penalize borrowers who consistently use the cheapest loans first or who never use expensive credit. Why? Banks are in business to make a profit. If you demand cheap credit, high credit lines, while maintaining low balances, you are considered a deadbeat in the eyes of the banks.

To maintain good standing with lenders, you need to use all of their different credit options. Use low-priced credit, but consider high-priced credit from time-to-time. Too much of either makes banks question your credit worthiness. By balancing high-priced and low-priced credit, you create a good reputation as a borrower. This information is then compiled into a score which is shared with lenders all over the country.

What is a credit score?

A credit score is a numerical index. It represents an estimate, of an individual's financial creditworthiness. It comes from a subset of the information, in an individual's credit report. Lenders, such as banks and credit card companies, use credit scores to determine credit limits and interest rates for loans. What considered good credit score?

Predominant credit score.

The best-known credit score, in the United States, is the FICO score. It is calculated using a mathematical formula, developed by the Fair Isaac Corporation.

The three major, American, credit report agencies (Equifax, Experian and Trans Union) all use variations of this scoring formula. Each uses it under a different name. The best-known are the Beacon score and the Emperica score.

FICO scores.

FICO scores, and its variants, are designed to measure the risk of default. They use various weighted factors:

35% punctuality of payment in the past,
30% capacity used,

This is the ratio of current revolving debt, (e.g. credit card balances) to total available revolving credit (e.g. credit limits).
15% length of credit history,
10% type of credit used (installment, revolving) ,
10% number of credit accounts applied for in the recent past.

The above percentages are approximate. Current income, and employment history, do not influence the FICO score.

Credit score standards.

Each of the major credit reporting agencies has its own method, for calculating credit scores. However, the scoring models are fairly well standardized. A "600" score at one credit reporting agency is roughly equivalent to another.