[A] credit score is the measure of the creditworthiness of a person. It determines whether he is a high risk creditor or not. In effect, the credit score is the most important factor in determining whether a loan application will be approved. However, aside from banks and other lenders, other businesses also use the credit score to determine the financial standing of customers. This is why it is important to know what is a good credit score.
Other uses of a credit score aside from loans are rent based businesses like apartments or that use the score to determine whether a an interested renter is likely to pay for the monthly rent. Credit reports are also used by businesses to assess whether an employee is trustworthy enough to be allowed to handle huge denominations of money, such as in banks or in the finance departments of major businesses.
If you see yourself as someone in situations like these, it is best to know what is a good credit score to keep you from having to go through the hassles of finding a low interest loan or any loan for that matter, finding a good rented apartment or warehouse for your business, or paying significant security deposits on utilities and other services.
So first of all, what is a good credit score?
Firstly, to know what is a good credit score, you have to know what the average credit score is. At present, the average credit score of borrowers in the US is anywhere from 680 to 700. Most lenders consider any score above 700 to be a good credit score. This means that a borrower who has a score greater than 700 is more likely to get a loan with an interest rate lower than the average. This score is generally accepted as a good credit rating by most businesses that use credit scores.
One important thing to know about credit scores is that these scores are not permanent. In a few years they may change by a huge amount. A perfect example is how the good credit rating for mortgages has changed since the recent recession. Two years ago, many mortgage lenders considered borrowers with a credit score of 650 to be prime borrowers. This means that these borrowers were allowed to get prime mortgage loans which had low interest. Amazingly, in a time span of just two years, what they considered to be a credit score for prime loans jumped to 750. The same can be said about the generally accepted good credit score.
The good credit score accepted at present may change in just a few months. Therefore, every creditor should monitor the trend in the market to know what is a good credit score. This will help them evaluate themselves before finding a loan or a mortgage.