What is a "good" credit score?

Question

Hey everyone, new to the community. I'm young, but got a bit of a late start to the credit game. I just got my first credit card almost a year ago and my first auto loan about 5 months ago. I've been doing well at paying off my bills and not utilizing more than 30% of my credit. My scores have just passed the 500 mark recently, and I know it'll take time to build it higher. At what point will I be able to finally jump in and try and get a mortgage? From looking at the forums above 700 seems to be a good score, but I don't know how long it will take to get to that point. My first goal is finding a place for my wife and our two dogs to live and possibly flip at a later date, but after that I'd like to begin building a portfolio of investment properties and tenants because Ive recently gotten a new job that allows me to save a decent (at least to my perception) amount of money for investing. So should I stick it out until I build up a 700+ score or what are my options?

Richard Dunlop · Answer

720 would be a good score

Do you have anything else current on your report besides the Car and the one CC?

To get your balance reported lower (A major factor in Score) Pay as much as you can right before they cut your new bill. (the same time they report your balance to the credit bureaus) and then charge back Utilities Groceries phone bill etc.

So maybe the fictitiously low balance they reported was only your actual balance for 3 days.  But the right 3 days of each month.

Brent Paul · Answer

It might take a few years to get your score in the 600s but it definitely can be done.

I agree with other posters that you really should have 3 credit lines open whether it's a student loan, credit cards or car loan.  Those all help your score when you pay them each month.  For maximum benefit you want to keep your credit card utilization under 10%.  You can do little things like charge gas or groceries then pay them off.

Also don't forget that hard inquires also reduce your score.  When I got my car loan I had 6 hard inquiries on my credit which sank my score by 20 points.  However they only hurt your score for about a year then they fall off after 2 years.

Pull your credit report it's free at annualcreditreport.

My score was also in the 500s and now I am around 660.  It took some work after my foreclosure, but it can certainly be done.  My credit was so bad I couldn't even get a car loan with a cosigner.  Keep your chin up, keep your balances low, and pay your bills on time.  You should be sitting pretty well in a year or two if you follow through on it.

Kerry Baird · Answer

Great ideas above!  Perhaps change the game plan and work on buying creatively...while at the same time improving that credit score.  An example of this would be to buy owner-carry, or on installment loan, or subject to the existing financing (not for everyone), or buying with a lease option...where you don't get financing until such time as your credit score is higher.  Another thought is to work on obtain business credit apart from your personal credit.  We have an older LLC, and instead of a FICO score it has a Dun & Bradstreet DUNS number.  The LLC has its own credit.

Linda Weygant · Answer

One of the banks I use has the following "rating"

Below 599 - Poor

600-639 - Low

640-659 - Fair

660-679 - Average

680-699 - Good

700-719 - Very Good

720-739 - Great

740+ - Exceptional

The "fair" mark is where banks will stop automatically rejecting you out of hand and the "average" mark gets them a lot more comfortable and to the point where if you've got a couple of dings, they'll still work with you.

As I'm sure you already know, repairing your credit is hard work and takes a lot of discipline and planning.  Good luck!

Andy Robison · Answer

Ah, there it is collections. Collections sucks. You should try and challenge them through the written process. 50/50 chance that the company that put the mark on your credit does not send a response.

Travis Mathews · Answer

Thanks for the advice, everyone! I'll make sure to work on my credit and open a few more lines. I'll also stick around to see what else I can learn.

Richard C. · Answer

Go to creditboards.  There are things that can be done about the old medical bills and collections.

DJ Thompson · Answer

@Travis Mathews  I would look into an AMEX card like stated before.  Also pull your credit report and see if you can get those collections and blemishes off your credit report.  Sometimes they will be removed if they are medical under the new FICO guidelines recently passed.  Barclay US has cards for lower tier credit people to build their score, just make sure to not abuse your purchasing power since they often give out high credit lines in the beginning.

Also, though not always accurate Credit Karma may help you to see if you are moving in the right direction with weekly credit report updates.  Its a soft inquiry so no worries with denting credit scores.

Travis Mathews · Answer

Truthfully I had some medical bills back when I was 18 and fresh on my own that took a little longer for me to pay off then should have, and required a little harassment to get me to start paying, but that was before I made the realization that you can't get anywhere in life with bad credit. My debts are paid now, but they definitely aren't helping me to this day and Ive learned that I need to start building my credit now.

Sam Erickson · Answer

Hey Travis,

When is comes to getting a mortgage banks look at your ability to by the monthly payment, so the fact that you have a job that pays your bills with some left over is a great thing.

The thing about credit scores is that they are inversely related to interest rates.  You don't have to have a 700+ credit score to get a loan.  What you will get with a 700+ credit score though are the best terms available.

I would talk to a local bank.  There are a lot of government loan programs that have the sole purpose of getting people who have low credit scores or who are building their credit into a mortgage. Most of them are going to be for owner occupants though which doesn't sound like a problem for you.

Be prepared to pay for your mortgage though.  Meaning don't expect to get the 3.75% interest rate more then likely you will be substantially higher then that. They may also require you to pay points on the mortgage amount.

What is a "good" credit score?

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