If you are in the market for a new car or maybe looking at buying a house, you may be interested in what your credit score is.  Maybe you recently found out your credit score and you are wondering how it competes with others on the credit score scale.  Perhaps you’ve gotten to the point where you’re asking “how can I improve my credit score so I can get better interest rates”?  Before actually going into what is a good credit score, I am going to give a brief rundown of what exactly a credit score is.

It is a scientific and mathematical calculation that puts together many factors and outputs a score that is supposed to help determine if someone is good to loan money to or not.  It combines two main factors, the situation your credit is currently in, and your past credit history.  There are other factors, but those are the main ones.

Each of the 3 different credit bureaus, Equifax, Trans Union, and Experian all determine your credit score in different ways, but they all use the same system, the FICO (from the Fair Issacs Company who developed the scoring model).    The score range from around 400 to a perfect 850.  The average credit score is around 670, and anything above a 700 is considered a “good credit score range”.

You may be wondering how to get a good credit score or perhaps even an excellent credit score – or a perfect credit score.  Well, you can do a few things.  The first thing is to not make any late payments at all.  Do what you need to do to ensure that all of your loans and debts are paid on time, every single month – so you’ll never face the music of having to fix bad credit problems.  That will help to establish a good credit history, and allow future lenders to know that they can expect to be paid on time if they loan to you.

Another key is to reduce your  total debt.  If you take your available debt (the max amount you can have on your credits), and if your current debt is more than 50% of that number, then your credit score will be lower.  Work on reducing your debt so that it is below 50% of your available debt, and perhaps consider using some kind of debt relief program to assist you with debt reduction.  This will help to contribute to a good credit score and a good credit report.

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