If you don’t quite understand what a credit score is and how it impacts you, you’re not alone. A modest credit score is essential for your financial well-being in both the short and long term. The higher it is, the less of a credit risk you are assumed to be by banks, car dealerships, furniture stores, and mortgage lenders. And if you’re looking to buy a car or a house, it can make the whole process much more complicated.
While many people that it’s a myth that insurance companies don’t use credit scores, it’s vital to note that most insurers determine rates by using your credit history.
What is a decent credit score, though? Is 650 a good credit score? Let’s answer all of your pressing credit-related questions right now!
Table of Contents
Understanding Credit Scores
Is 650 a Good Credit Score?
Improving Your Credit
Understanding Credit Scores
By simple Experian definition, a credit score is a number of lenders used to help them decide how likely they will be repaid on time if they give a person a loan or a credit card. They use it to determine if they will loan you money and the interest they will charge you. More interest means they get paid their original loan amount back quicker, hopefully before you stop paying on the loan.
While it may not seem fair, these scores aren’t based on guesses and assumptions. Your credit score is built on your credit history. Some factors that may affect credit scores are:
- Your total debt
- Types of accounts
- Number of late payments
- Age of accounts
Your FICO® Score ranges from 300 to 850. This is a wide range, though. Is 300 bad, 850 good, and everything else okay?
Is 650 a Good Credit Score?
In a word: yes! A good credit score is 670 to 739 in the FICO® Score range and 661 to 780 in the VantageScore® range. It’s important to note that good isn’t good enough for credit. This isn’t the highest category. A score of 800 or above is considered to be excellent. This is what lenders are looking for to give you the most funds for the lowest interest rates.
Most people have credit scores between 600 and 750. In 2020, the average FICO® Score in the U.S. reached 710, which reflected an increase of seven points from the previous year.
How to Improve Your Credit
A credit score reflects your likelihood to repay debt responsibly based on your past credit history and current credit status. If you want to improve your score, you need to show lenders you can do this. Another way to improve your credit involves knowing what works in favor or against you. That’s where your credit history comes in.
Is 650 a good credit score? To find out about your unique score and how it’s affecting your insurance rates, pull your credit report copy from each of the three major national credit bureaus: Equifax, Experian, and TransUnion. Once you know what you’re working with, you can plan to remove or work past negative marks and increase the number of items that boost your credit, including paying your bills on time. This includes your auto loan, different car insurance types, homeowners insurance policies, and more.
