Good Credit

Good credit refers to the healthy debt history of an entity with a record of timely payment of loans and bills per the schedule set by the lender or credit provider. It is a benchmark for lenders to adjudge an entity's eligibility for a loan. 

Good credit ensures faster loan approval at a lower interest rate and huge savings for an entity. It depends on the entity's FICO rating as reported by credit rating agencies, with a higher FICO score between 670-739, implying good solvency. In addition, good repayment history and a lesser debt burden on individuals result in higher FICO scores. 

• Good credit refers to the characteristic of a borrower whose credit score is high on FICO, who repays loans timely, and who has lower debt burdens.
• It ensures smooth loan approvals at a lower interest rate, leading to gradual savings.
• The best way to have a good credit score range of 670 to 739 is to ensure fewer loans that are repaid timely and have low credit card limit utilization when required.
• It has many benefits, like lower interest rates, faster approvals, savings on the cost of loans in the long run, no deposit on utility services, and better chances of employment.

Good credit refers to a remarkable trait of an entity or individual regarding on-time repayment of loans without default resulting in a higher rating. It depends on the borrower's prudence regarding the borrowing limit and compensation—credit rating agencies like FICO rate borrowers' capacity through their rating models. If the borrower scores high on their model, the rating companies consider it to have a good solvency record; otherwise, they get negative responses.

Good credit depends on many factors of the borrowers like the following:

• A borrower has good repayment history.
• The borrower never defaults on his loans.
• They do not apply for loans quite frequently.
• A borrower has few loans that match his needs. 
• The borrower has a good credit card APR. Borrower's credit card has a high limit but low utilization.
• Lastly borrower must have a FICO credit score of 640 and above. 

Suppose one maintains a good solvency record adhering to the above factors. In that case, it becomes more accessible to fulfilling the aspirations of opening a new business or getting a new car from the bank. Moreover, good credit also convinces banks to give loans easily. It implies that the person is responsible and financially sound. Therefore, banks won't lose money if they lend to such people.

Good solvency rewards hard-working and honest people in getting a home to spend their lives comfortably. It also enables one to get rented premises quickly. In short, one can get any solvency from lenders with a good credit history/record.

For a better understanding of the topic, let us browse through some good credit examples.

Example #1

Let us suppose Alex applies for a vehicle loan with a bank. Bank immediately conducts a test using a credit rating module on Alex's loan application. As a result, the FICO score was above 760, meaning Alex obtained a good credit score. It implies that Alex has a lower debt burden. Moreover, Alex has repaid all his loans on time. Therefore, for the bank, Alex has good solvency for obtaining any loan at lower rates and faster approval.

Example #2

Recently Biden administration has decided to cancel $20000 in debt related to a few student-loan borrowers. However, it will lead to marking these student loans as current in all solvency reports in the middle of a payment pause for two years. Hence, the Biden administration's action will have a positive as well as negative impact on the credit score of students in case it writes off the student loan entirely. 

Everyone must make an effort to improve their credit score, for it helps in future debts. Hence, this section discusses steps to achieve good solvency by an individual:

• First, one must make payments on loans on time.
• One must keep a low credit card balance and only use good credit cards.
• One should apply for an increasing card limit that will reduce solvency utilization.
• Then, one must report all open accounts to solvency bureaus
• Seek a loan only when in urgent need
• Avoid frequent loan eligibility inquiries in a short time

Good solvency plays an essential role in easing the lives of consumers. Let us have a look at the good credit benefits:

• First, it improves the lifestyle of a person.
• One gets credit cards and loans from lenders at a lower interest rate.
• One does not give deposits for utility bills.
• One can quickly obtain an auto loan from banks.
• Many companies offer jobs to applicants with good solvency
• Business loans, too, require a good record of solvency history

This article has been a guide to what is Good Credit. Here, we explain it in detail, with how to get good credit, its examples, and its benefits. You can learn more about it from the following articles -

• Business Credit Score
• FICO Score vs Credit Score
• Credit Creation