Decoding Credit Score

It’s frustrating, but the real answer to, “What’s a good credit score?” is “It depends.” There are over 1,000 scoring models used, which means it all depends on what type of score you’re considering. FICO is generally considered the most important score, and it can range from 300 to 850. The median score is somewhere between 700 and 760, so if you’re in that range you’re considered normal.

Even if you have an upper-700s credit score, or you’ve made it into the elite 800s, there will always be room for improvement. Good credit is dependent upon the “right” amount of the “right” loans paid at the “right” time. FICO scores also reflect how long your credit history is, and the longer the better-in other words, it’s a lot easier for someone in their 50s to have good credit compared to someone in their 20s just by virtue of their age.

Instead of obsessing over that elusive 850, focus on good credit practices that will improve your score over the long haul. Pay off all your credit card debt each month, but aim to have a small selection of credit cards open-between three and eight is a good range. For some people, this is easy, but for others it’s extremely challenging to stick to that zero balance. Each account should be used at least once a year, and you should never cancel a card unless you’re paying an annual fee for it.

When a card is canceled, that credit line basically disappears. That’s why choosing credit cards with low-interest rates and rewards that are beneficial to you are so important. Financing a car, student loans and mortgages can also help boost your score, assuming you make the payments on time.

Unfortunately, there’s no black and white formula that you can lean on to make sure that you’ll get approved for a certain loan or interest rate. Your best bet is watching your credit score, cleaning up any mistakes and practicing good credit skills. There are also reputable legal firms that specialize in helping you clean up your credit if you went through a rough patch. With this approach, your score will naturally rise without stressing you out.