What is a Good Credit Score?

Good Morning DINKS.  One of the major factors that people try to improve on or better in their financial lives is their personal credit score. 

A good credit score can make both our personal and our financial lives a lot easier.  Having a good credit score can help us get a discount on our home and auto insurance, it can help us get our dream job, and it can also help us be approved for a mortgage loan or a credit card.  Many people know that a good credit score is a good thing to have because a good credit score can help people get the things that they want in life.  However, many people don’t know how to obtain, increase, and/or maintain a good credit score.

A good credit score is a number between 300 and 850 that evaluates your credit worthiness for potential creditors.  Of course there are other factors that potential creditors consider when we apply for credit products such as our personal income, our personal savings, as well as our other debt repayment commitments.  However, one of the major factors that potential creditors look for when we apply for credit products is our numeric credit score.

There are several factors that can help us build a good credit score and it’s important to know what they are so that we can make smart financial decisions.  It is a smart idea to start our financial lives with a good credit score instead of making financial mistakes and trying to rebuild our credit score later in life.  Applying for a credit card at a young age and using it responsibly is the key to building a good credit score. Using our debt responsibly means making purchases on our credit cards and paying off our credit card balances every month; these little tips will help you build a good credit score.

Just in case your credit score is not so great you can always make changes in your financial habits to help increase your credit score.  Some main reasons why someone’s credit score could decline is because they are accumulating a lot of debt, they are making only monthly payments, and they have made late payments on their credit products in the past. If you start to change your financial habits you can start seeing an increase in your credit score within 12-months.  It may seem like a long time, but it is definitely worth it because having a good credit score opens many financial doors.

Realizing that your credit score is less than desirable and making the conscious decision to make changes in your daily financial habits is the first step towards improving your credit score.  Setting up regular automatic payments onto your debts that coincide with your pay check is the easiest way to start repaying your debts.  If you are paid on a biweekly basis then you should also be making payments onto your debts on a biweekly basis.

If your credit score is low because you have accumulated too much debt then you should stop accumulating debt.  Many people make large debt payments each month but then they don’t have enough money to live. If you continue using your credit to live and pay your daily expenses you will continue accumulating more debt. Not using our debt and not accumulating any more debt will help us get out of debt sooner.  Making payments that we can afford and setting a target debt free date will also help us become debt free.

Photo by imagesofmoney

Kristina Tahnyak

Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.