A good credit score is evidence of a lot of hard work, discipline, and good money management skills.

The FICO credit scoring system is disseminated through credit reporting agencies to potential lenders.  Lenders consider your FICO score, or credit score, when considering extending you a line of credit.  Your FICO score is a cumulative analysis of your consumer credit history, and it is affected by many several factors.

The number one factor affecting your credit score is your payment history.  Payment history accounts for more than one third of your credit score, and it is the area that will hurt your score the most if your payment history is derogatory.

The amount of outstanding credit you have affects your score by nearly 30%.  Your balances, in relation to your total available credit are key factors.  If your credit lines are all near, or at their limit, it will negatively affect your score.  If you have a large amount of unused credit available, and low balances, it shows self-control and will affect your score positively.

Other factors that may affect your FICO score are the length of your credit history, the types of credit lines, the amount of new credit, and number of credit inquiries.  Lenders take these into account when determining your credit worthiness.

FICO credit scores range from 300 to 850. A FICO score of 700 or higher demonstrates very good or excellent credit.  People who achieve FICO scores in this range are considered by most lenders to be a good credit risk, and at lower risk of defaulting on a loan. Credit scores of 720 and higher will usually be offered favorable loan rates and terms, with lower fees.

Credit scores ranging from 680 to 699 are considered good; people in this range can usually get decent loans on good terms. At this level, you would still be considered a good credit risk.

People with scores ranging from 620 to 679 are considered to have “OK” credit.  Loan rates, fees, and terms will usually not be as nice at this stage.

Bad credit generally begins at a credit score of 619 and below. At this stage, your offers and options decrease significantly, and you will need to work to repair your credit score.

People who have good credit scores stand to save hundreds of thousands of dollars in their lifetime. The amount in mortgage interest alone is usually the bulk of their savings, but the benefits of good credit may reflect in other areas.

Lenders are constantly soliciting people with good credit with low interest loans, and high interest-yielding accounts.  People with higher FICO scores will have more borrowing and investment opportunities than those who do not.  Insurance premiums are often directly affected by your credit score. Even prospective employers may consider your credit score in determining your suitability for employment.

The best way to achieve a good credit score is to establish a good payment history, pay down your debts, monitor your credit and exercise discipline and good judgment when it comes to spending.