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"Good" Credit vs. "Bad" Credit - What It Really Means

Let's dive into the difference between good credit vs. bad credit and how your score can impact you.​

Good credit vs. bad credit. While you might hear about the difference between a good credit score and a not so good credit score, what do the terms "good credit" and "bad credit" really mean? Since good and bad are subjective, how do you know where you score falls? And how is your life impacted when you have a high score vs. a low score? 

Let’s dive into the difference between these two credit categories and how your score can impact you.

Credit Score Ranges

Your credit score can range between 300-850. 

Where your score falls within that range represents your creditworthiness - or how responsible you’ve been with managing your credit-related tasks such as making payments on time, not accumulating too much debt, and the like. 

You want a good credit score because it follows you throughout different areas of your life, from qualifying for a loan to getting approved for a mortgage or apartment. 

A high score makes getting approved for a credit line easier. It’s also less expensive because low-interest rates and high credit scores go hand in hand. 

So, what are the typical credit score ranges?

According to myFico.com, there are five credit categories. You can see them below:

300-579: Very poor

580-669: Fair

670-739: Good

740-799: Very Good

800-850: Exceptional 

Keep in mind that different sources will state that good credit starts at 690 or 700, so you want to take the specific starting point for “good credit” with a grain of salt. In this area, good is subjective and will depend based on who you ask.  

What Is "Good Credit"?

670-739 is deemed good credit because it’s what’s acceptable in our society. When your score falls in this range, it’s near or slightly above the average US consumer score. Most lenders will approve your loan, give you an acceptable interest rate, or approve your credit line with this score. If your score is above this range - even better. 

What Is "Bad Credit"?

Conversely, bad credit is seen as typically falling below 580. This is credit that is well below the average score for US consumers and shows that you’re a risky borrower for lines of credit and loans.

What Does Your Credit Score Mean When It Comes To Lenders And Applying For Credit?

Your credit score can impact various areas of your life - especially if you plan to borrow money or secure lines of credit for a home, vehicle, for personal reasons, or something else altogether. 

Good credit helps you get an approval that comes with terms you can be proud of. 

What Implications Might Someone Have Who Has A Lower Credit Score?

Having a lower credit score can make qualifying for big-ticket purchases and securing lines of credit more difficult and expensive. The same can be true for renting a home since you might not get approved or setting up an account with a utility company without having to make a down payment. 

Over your lifetime, having bad credit will cost you in opportunities and cold hard cash as you pay more in security deposits, monthly payments, and overall due to high-interest rates. 

What Are The Benefits Of Having A Higher Score?

With a good credit score, you will get more approvals with better interest rates.  

This is because lenders trust that based on your credit score, you can manage your debt. Your credit score even goes further than financial lenders. Some property management companies, cell phone companies, and utility companies will check your credit to see whether you qualify or meet specific terms before moving forward with your desired service.

What Are The Ways To Improve Your Credit Score?

You can turn your credit score from bad to good. It happens all the time. While the steps are simple, implementation isn’t always easy, so having a strategy to remain consistent in your efforts can make all the difference. 

  1. Dispute errors: Review your credit report to determine whether errors lead to a lower credit score than you should have.
  2. Make on-time payments: Pay your bills on time every month. If you can’t afford to make the payment, set up a payment plan. Payment plans won’t hurt your credit but failing to pay altogether will. 
  3. Lower utilization rates: Your utilization rate is determined by comparing your balances to your available credit. An acceptable utilization rate is around 30%. If you carry higher balances on your credit cards, you want to develop a debt pay off plan to reduce your utilization rate. 

In addition to these tips, you can use our free financial guidance resources and services to help get your credit score on track. 

Understanding Good Credit vs. Bad Credit

Your credit score can significantly impact your ability to qualify for credit cards and loans, and how you use your credit cards can ultimately make the difference between you having good or bad credit. 

While it’s essential to understand good credit vs. bad credit, you also want to learn how credit cards work and be sure to utilize your cards responsibly to build or improve your credit profile. 

Learn How Credit Cards Work

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