Achieving and maintaining a good credit score may be important to achieve financial wellness. Your credit score represents your creditworthiness, and it plays a significant role in determining your ability to secure loans and get better interest rates.
We’ll dive into the fundamentals of credit scores, explore what makes a “good” score, discuss the importance of having good credit, and provide practical tips on how to monitor your credit effectively.
What is a Credit Score?
According to the Consumer Financial Protection Bureau, a credit score is “a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.”
By leveraging credit report data such as bill-payment history, unpaid debt, types of loans, number of loans, average loan age, credit utilization, and more, data analysts can calculate a numerical representation of your creditworthiness. This number is commonly known as a credit score and most credit scores range from 300 to 850.
What is a “Good” Credit Score?
Credit scores in the United States generally range from poor (300) to exceptional (850). Although ranges vary depending on the credit scoring model, a “good” credit score may also be known as a “prime” score and generally falls between 660 and 780. Consumers with a “good” or “prime” credit score are usually seen as lower-risk borrowers.
Lenders are allowed to lend to whoever they want, however, so just because you have a “good” or “prime” score doesn’t mean you’ll be approved for the loan you want. Here’s how the VantageScore ratings are broken down.
- Superprime: 781-850
- Prime: 661-780
- Near prime: 601-660
- Subprime: 300-600
Why Do You Need “Good” Credit?
Having good credit may be a key part of reaching your financial goals. Here are some reasons you strive for good credit.
- Loan Approval: A good credit score means you are a responsible borrower, increasing your chances of being approved for mortgages, car loans, and more.
- Lower Interest Rates: Good credit means you may qualify for lower interest rates on loans and credit cards.
- Better Credit Cards: Good credit is required for a credit card with great rewards, low interest rates, and high credit limits.
- Rental Applications: A good credit score can increase your chances of being approved for a rental property.
- Insurance Rates: Some insurance companies use credit scores to determine premiums for auto and homeowners insurance.
- Utility Services: Some utility companies may check credit scores when you open new accounts. A good credit score can help you avoid having to pay security deposits.
How To Monitor Your Credit
- Websites like Credit Karma, Credit Sesame, and NerdWallet offer free credit scores and credit monitoring.
- If you have a credit card, check if your credit card company offers free credit scores to their cardholders as a benefit.
- Some banks and credit unions offer customers free credit scores.
- You can request a free copy of your credit report from each of the three main credit bureaus through AnnualCreditReport.com.
- Companies like IdentityForce, LifeLock, and MyFICO offer paid credit monitoring services that include access to credit scores, credit reports, and other features like identity theft protection.
How DailyPay’s Credit Health Can Help
In addition to the resources we’ve mentioned above, DailyPay offers Credit Health, a free credit monitoring service for users enrolled in DailyPay.
DailyPay’s Credit Health product features key financial insights including credit bureau score and history, credit report, monitoring/alerts, and score factors.
Credit Health is a financial wellness tool to empower you to stay informed about your creditworthiness and detect any suspicious activity early on. (As a reminder, accessing your credit score using DailyPay Credit Health does not affect your credit score in any way. DailyPay does not use your credit score or report to any of the credit bureaus.)
This publication is for informational purposes only and should not be relied upon for any other use. DailyPay is not, by means of this publication, rendering financial or other professional advice or services. DailyPay does not warrant the completeness or accuracy of any information provided to you.
