What qualifies as a 'good' credit score?
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
Hi. My credit scores
are 720, 720 and 659. I have no credit cards or debts. However, I do have a
judgment pending in dispute dated from 2008. Would I be approved for a
regular credit card or more likely for a secured one? Should I even apply and
possibly drop my score? -- Amy
You must have done
something right in the past because your current scores aren't bad at all. In
fact, assuming these are FICO scores and not some others that have a different
scale, they're quite respectable.
FICO scores range from a
low of 300 to a high of 850. What is considered poor, fair, good and excellent
fluctuates. In general, though, those in the mid-600s to the mid-700s are
deemed "good." Higher than that and you're in the "excellent" range.
Because your scores are
nearly what most lenders, credit card companies and banks find attractive, it
won't take much to push them into the top tier. Here's what you need to do:
Deal with your judgment. It's 2012 now, which means that the matter ought to have been
settled long ago. If the outcome of the dispute was in your favor, it should no
longer be listed on your reports. Contact the bureaus to have it removed.
However, if the creditor
did win the case and you do owe money to them, it will remain on your report
for seven years from the date the judgment was filed. It is getting on the old
side, so its impact is lessening, and sometime in 2015 it should drop off
completely. Still, while they may not report it after that, they may be able to
renew the judgment and come after you for the money. Paying it off will be to
your benefit, both to get it off your shoulders and to improve your credit
Apply for the right credit card. You can either jump in now or wait until after you've satisfied
the judgment. Banks offer credit to people with scores ranging from
poor on up. Mind you, though: They base their decisions on income as well as payment history. If
you don't have a job, they won't feel confident that you'll be able to repay
what you borrow.
Presuming you are
employed, check out the credit card deals that are available to people with the type of
credit that you have today: good. Like what you see? Great. Apply to the most
appealing one and only apply for one card. Shopping for credit is not like
shopping for clothes, where you can buy a bunch of sweaters and return those
that don't fit with no repercussion. A mass of applications will reduce your
score. Not by a tremendous amount, but since you are trying to boost your
scores, go easy. If you get denied, move on to the next.
Oh, and you can get a secured account, but you probably won't need to. In general, they are for
people who have lower credit scores -- either because they are new to credit or
have already damaged it.
Charge to your advantage. Once you have a credit card, use it well. In theory this is
easy, but in practice it can be a challenge. My best advice is for you to
choose an expense to charge once a month, like groceries or gas, and then pay
it off on time and in full.
When you're comfortable,
loosen up and charge other items, too, but continue to pay the balances off
every month. Not only will you be establishing a great habit, but all that
activity will be recorded in your credit files and your scores should rise.
Best of luck to you, Amy!
See related: FICO's 5 factors: The components of a FICO credit score
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: September 26, 2012