What Credit Score is Considered “Good”? What to know about Credit Scores

March 4, 2019

This guest post was provided by Debt MD ®, a free service that connects consumers with the professional help they need to become debt-free. Debt MD aims to make the path to financial freedom as quick, simple, and stress-free as possible.

A good credit score is becoming more important. A good credit score illustrates to lenders that you are a responsible borrower. There are three major credit bureaus that report on your credit history and determine your credit score. The higher your credit score, the more you’ve established yourself as a responsible borrower. The higher your credit score the more likely it will be to receive favorable interest rates and loan terms.

Did you know credit scores can be requested from other organizations outside of the financial industry? Credit scores not only illustrate responsibility as a borrower but provide a snapshot of how you handle finances. When you want to establish services like a phone, utilities, insurance, or even rent an apartment, providers look at your credit score. This allows them to choose whether they should allow you to obtain their service or not. Even employers are now looking at credit reports prior to hiring someone.

Who Determines a Credit Score?

What’s a three-digit number that can either make or break your financial deal? Yes, you got it right, it’s your credit score! There are several different types of credit scores generated using your credit report. So, in simplicity, you determine your credit score, since you control how you utilize your credit and finances.

A credit report is just that a report on your credit history. It includes details regarding credit card payments, loan payments, and the status of each. Your Credit Score is then calculated using your credit report. Most commonly used is the FICO® score developed by the Fair Isaac Corporation.

What Makes Up a Credit Score?

The FICO® Score is the most widely used credit scoring model. In fact, according to Fair Isaac Corporation FICO® Scores are used in 90% of United States credit lending decisions. FICO® Scores are calculated using five main parts of your credit report. The FICO® Score utilizes amounts owed, new credit, length of credit history, payment, history, and credit mix to calculate your personal score. Each category represents a percentage as illustrated on the chart below, to create your full FICO® Score.

What’s a Good Credit Score?

We now know what a credit score is, what attributes to it, and the main type of credit score used throughout the lending industry, but what is a “good” credit score? Generally, FICO® Scores range from 300 to 850.

Here is a look at the FICO® Score ranges and their equivalent rating.

Credit Score Range: Rating

300 to 579: Very Poor

580 to 669: Fair

670 to 739: Good

740 to 799: Very Good

800 to 850: Exceptional

It is important to note that a “good” credit score cut-off will vary depending on the type of financial institution that you are dealing with. For instance, if you are applying for a mortgage loan, to qualify your score typically must fall between 700 and 759. To qualify for an auto loan your score would ideally be above 740, and to get the best rewards credit card you typically should have a score of 720. If you’re looking to refinance student loan debt you’ll likely be required to have a 650 credit score or higher.

It’s important to recognize that lenders do not solely base their decision on credit scores. In addition to your credit score, lenders may look at your credit history, debt-to-income ratio, assets, and liabilities to determine if you’re a good risk or not. The higher your credit score the better, as it illustrates your reliability as a borrower hence presenting a lower risk to the organization. When a person has a higher credit score they likely will be presented better borrowing options due to their credit history.

How To Find Your Credit Score?

Checking your annual credit report regularly is one of the most important habits to develop. This is especially true if you want to improve your credit score. By verifying your credit record, you’ll be able to check for errors and discrepancies and dispute them when applicable.

Checking your credit reports will also help you to recognize signs of identity theft, which is becoming more prevalent. You can get your credit report at no cost once every 12 months from each of the three widely recognized credit bureaus (Equifax ®, Experian ® and TransUnion ®) from AnnualCreditReport.com.

7 Money Mistakes to Avoid

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House Democrats Overturn DeVos on Student Loan Forgiveness

This Thursday, the Democrat-controlled House voted to overturn regulations introduced by Education Secretary Betsy Devos that eliminate the "borrower defense" rules introduced by the Obama administration. Critics have said the new regulations make it more difficult to get student loan forgiveness if a college suddenly closes. Sources say that the move to overturn Devos' new regulations won't pass the GOP-controlled Senate, however – and Trump is likely to veto the bill even if it does.

Source: USA Today

Could Elizabeth Warren Really Wipe Out $1 Trillion in Student Loans in a Single Stroke?

Democratic Presidential Candidate Elizabeth Warren recently vowed to eliminate hundreds of billions of dollars in student loans on her first day in office if elected president. Her plan was released just before Tuesday night's Democratic primary debate. While the ability to erase debt is typically a decision left to Congress, student loans may be a different story due to a loophole involving the "Higher Education Act" passed in 1965.

Source: CBS News

Study: Barely Anyone is Paying Off Their Student Loans

A recent study revealed that very few people are making progress on paying off their student loans, along with shifting factors in the nation's rising student loan debt. The study found that 51 percent of students who took out loans from 2010-12 haven’t made any progress in paying them off. Additionally, it showed that while in the past higher enrollment and rising tuition costs were the main drivers in the rising debt, slow repayments and amassing interest have now become the primary drivers.

Source: NY Daily News

IRS Issues Tax Guidance On Discharged Student Loans

The Internal Revenue Service recently issued guidance for some taxpayers who took out federal or private student loans and qualified to have their loans discharged. Typically, having loans discharged is treated as a taxable event, in which the forgiven amount is treated as income – but the tax break from the IRS allows the discharged amount to not be recognized as taxable income.

Source: Forbes

That wraps things up for this week! Follow us on Facebook, Instagram, Twitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-15

Starting a Family? Why Now’s the Time to Refinance Student Loans

By Caroline Farhat

Are you planning to start (or add to your) family? Congratulations! Children are such a special joy, and starting a family is an incredible journey. Whether you’re already expecting or are just in the planning stages, there is a good chance you’ve started crunching some numbers to see how adding a family member will affect your monthly budget. It’s no secret that kids are expensive — the U.S. Department of Agriculture reported that, on average, it would cost a middle-income family $233,610 to raise a child born in 2015 through the age of 17. If you’re currently paying off debt, the eye-popping numbers a child costs may look even more daunting. But money should absolutely not stop you from starting a family. Of course, you want to be financially responsible, but you shouldn’t feel pressured to be debt-free before starting a family. Instead, focus on the things you can do to lighten your budget and leave more room for your new bundle of joy. Here’s how refinancing student loans can help.

Why Refinancing Student Loans When Starting a Family is a Smart Move

One of the biggest worries many new parents have about starting a family is the financial unpredictability children can bring to the household budget. Medical costs, childcare, and all of the latest baby products can certainly add up. One of the best ways to combat this unpredictability is by lowering your fixed monthly costs. If you are currently paying off student loan debt, refinancing student loans is one of the smartest steps you can take to lower your monthly payment. In fact, student loan borrowers who refinance with ELFI* have reported an average savings of $309 per month1. To put that in perspective, that would get you 38 packs of 32-count diapers. Plus, the emotional benefits you can receive by throwing less money at your student loan debt and more on what is really meaningful to you can be priceless.

How To Refinance Student Loans

If you’re looking at your interest rate and are ready to refinance, you’ll be happy to know that it’s a simple process that can be done entirely online. If you refinance student loans with ELFI, the application process is 100% free, and refinancing has no origination fees or prepayment penalties. The ROI of refinancing student loans can also be quite large. Just an hour or two of work can yield you thousands of dollars in savings. Not bad, right? Here’s what to do:

Check the requirements - While student loan refinancing is a smart move for many student loan borrowers, there are a few cases where refinancing may not be the best option. For example, if you qualify for student loan forgiveness through a federal program, refinancing student loans would make you ineligible for this benefit. Review the basic criteria for student loan refinancing to make sure it’s the best fit for your particular situation. It’s important to fully understand how the Public Student Loan Forgiveness (PSLF) program works and the eligibility requirements.

Crunch the Numbers - Put your data into our student loan refinance calculator to see your potential savings. Our calculator has options for fixed and variable interests and loan terms of 5, 7, 10, 15, or even 20-year terms so you can see how your choices affect your monthly and lifetime payment*.
Get prequalified - You can get prequalified and receive personalized rates in just a few minutes without it affecting your credit score.
Gather your documents and apply - As mentioned, the application is 100% online, easy, and free. When refinancing with ELFI, you are paired with a personal loan advisor who will guide you through every step of the process. The Personal Loan Advisor who speak with at the beginning of the student loan refinancing process is the same person you’ll speak with at the end, which is nice because you won’t find yourself repeating information or prior discussions.

What to Do About Other Debt and Expenses

If you’re like many Americans, student loan debt may not be the only debt you are currently paying off. A whopping 80% of Americans are currently in debt, according to a report from The Pew Charitable Trusts. Here are a few ways you can pay off your debt more quickly or more efficiently.

Refinance Your Debt - Similar to refinancing student loans, you should look for opportunities to refinance any of your other debt. For example, if you have a mortgage, refinancing could save you thousands of dollars over the life of your loan. Auto loans can also be good candidates for refinancing.
Call Your Credit Card Companies - A reduction in the interest rates on your credit cards can make a big difference in how quickly you can pay down debt. A simple, polite phone call to your credit card companies requesting an interest rate reduction can sometimes be all that it takes. You have nothing to lose (except a few minutes), and the payoff can make a major difference in your monthly budget.
Explore Medical Debt Options - Approximately 66.5% of Americans who file for bankruptcy due so because of medical bills. There are options to get this debt under control, but it will take some leg work. NerdWallet has a number of good tips for how to negotiate down your medical debt or develop a payment plan that works for your budget.

Typically, when paying off debt, it’s wise to start with the loan with the highest interest, as that will save you the most money in the long run. Once you have reduced your interest rates as much as possible, take stock of all of your existing debt payments and their monthly costs, and develop a plan. With any of the money you saved, you can start a separate savings account for your growing family.

Children Are Priceless, So Don’t Let Debt Stop You

It may sound cliché, but there are things in life that are just priceless. For many people, the love and joy a child can bring to life are worth more than any spreadsheet will tell you. If you are currently working towards paying off debt, don’t let the goal of being debt-free trump your desire to start a family. There simply may never be a perfect time. Plus, with a little planning, it’s entirely possible to start a family and still work on your financial goals. Good luck to all of our current and future parents out there – you got this!

*Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions, The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change. ¹Average savings calculations are based on information provided by SouthEast Bank/Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon several factors. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-01-13

Mark Your Calendar for These Important Financial Dates

It’s no secret that as you get older, life gets more complicated. Long gone are the days of simply saving spare change from your grandpa’s pockets in a ceramic piggy bank. Even that savings account you opened in high school is outdated now that your expenses have exploded beyond just food, entertainment, and a cell phone bill. As an adult, you have to consider your student loan debt, saving for retirement, and affording childcare, among an ever-growing list of other financial obligations. One way to effectively manage your money in adulthood is to be aware of important financial dates. This helps you predict and prepare for big expenses to be sure there are no surprises. It even helps you capitalize on saving opportunities. And since it’s a new year, there’s no better time to pull out your calendar and mark these noteworthy financial deadlines.

Important Financial Dates

January

Review Last Year’s Finances – Reassess your retirement funds and allocations based on how they performed last year. If you didn’t get the gains you hoped for, now may be the time to reallocate your portfolio (i.e., adjust where your money is distributed among savings accounts, stocks, bonds, etc.) Also, take this time to consider adjusting contributions toward accounts like your 401(k) if your employee matching program changed. Standardize Financial Dates – It’s hard enough remembering bills without them being due at different times throughout the month. Change payment dates to be on the same day at the end of the month, which gives you 30 days to get money in the right place. Fund Your IRA – If you have a Traditional or Roth IRA (Individual Retirement Account), you can contribute up to $6,000 a year to these accounts. January 1 is the first day of the year that you can make such contributions, and investing as much as you can, as early as you can, maximizes the number of days your money can grow. Revise Your Student Loan Debt Repayment Strategy – If you got a raise at the end of last year (or beginning of this year), be smart with that money and direct it toward your student loan debt. Even a raise of 2-3% can help you pay off loans quicker, reducing the amount of interest paid over the life of the loan.

February

Max Out 401(k) Contributions – Many people aren’t aware that as long as you haven’t hit your yearly limit, you can contribute toward your 401(k) beyond December 31. You have until Tax Day to make these tax-deductible contributions. So if you have the means, now is the time. In 2019, the limit for employee 401(k) contributions was $19,000.

March

Prepare for Tax Day – Be ready for April 15 by getting your documents and information organized in advance. Make sure you have all forms needed from your employer, investment accounts, mortgage accounts, and student loans. TurboTax has a handy guide for commonly-used IRS tax forms, including a Form 1098 that you’ll receive if you paid interest on a student loan last year.

April

File Your Taxes – April 15 is Tax Day in the U.S. For those of us with student loan debt, the interest portion of these payments is tax-deductible, up to $2,500. Maximize Health Savings Accounts – Tax Day is the last day to contribute pre-tax dollars to last year’s HSA. In 2019, individuals could contribute up to $3,500 as an individual or $7,100 as a family. Spend Down Flexible Spending Accounts – April 30 is the deadline for spending last year’s FSA funds. Remember, these are “use it or lose it” accounts and money can be applied to copays or other out-of-pocket expenses. You can even spend it on health-related items at FSAstore.com.

May

Check Your Credit – This important financial date isn’t tied to May, but it should be somewhere on your calendar every year. Your score determines your ability to improve your interest rate with student loan refinancing. A check can also let you know if any fraudulent activity—tied to your name—has occurred that might negatively impact your student loan refinancing.

June

FAFSA Application Due – June 30 is the last day to complete the Free Application for Federal Student Aid (FAFSA) for the upcoming school year. If you already have a student loan, consider student loan refinancing. By consolidating and refinancing your loans, you can make payments simpler and possibly reduce your monthly payments.

July

Refinance Student Loans – Summer is a great time to refinance student loans because you won’t be distracted by the holidays or year-end deadlines at work. When you’re ready, check your eligibility for student loan refinancing at ELFI.com.*

August

Contribute to Emergency Funds and Savings – Unless someone in your family heads back to school this fall, August is typically a sleepy month for finances. Time to double-check that you’re contributing to emergency funds and holiday savings accounts so you don’t get into financial trouble during end-of-the-year festivities.

September

Car Shop – This month is a great time to look for a new vehicle. Dealerships are in a generous mood since new models will soon start rolling into the lot, and they need to clear inventory.

October

Complete FAFSA for Next Year – October 1 is the first day to file your FAFSA for next school year. Filling out this application as soon as possible ensures you don’t miss out on available aid.

November

Open Enrollment – Employers typically hold open enrollment during this time of year. Reassess if your current plan still works for you. Also consider if it’s worth changing plans or opting out of certain coverage (like dental) to reallocate funds to debts, like student loans.

December

Review Accounts – Make sure you’re making the right moves to use your FSA money, maximize contributions to savings accounts, and even if you need to file a new W-4 to withhold more or less money from your paychecks. Withholding less can be part of a new student loan repayment strategy where you have more cash to contribute toward the loan. However, it also means you won’t get as big of a refund next tax season. Shop Around for Car Insurance – While you’ll want to update your car insurance after any major life change, such as moving or having a child, you could score additional savings depending on the time of year. In a 2014 study, December was the cheapest month to obtain car insurance, with March being the most expensive. While the jury’s still out on the exact reasoning behind the shift, market competition and the likelihood of natural disasters could be a contributing factor. Being aware of important financial dates can help you save and manage your money so you have more options down the road for student loan repayment, business opportunities, and real estate investments. If you’re ready to explore student loan refinancing, you don’t have to wait for an important financial date on the calendar. You can learn about eligibility, benefits, and more—today—at ELFI.com. This blog has been prepared for informational purposes only and does not constitute financial advice. Always consult a professional for guidance around your personal financial situation. *Subject to credit approval. Terms and conditions apply. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.