If this seems like it is a frustrating answer to your question, it is even more so to a banker because there are people with 775 or 825 credit scores who are probably poorer risks than a person who has struggled to raise his credit score to 630.
Technically, a credit score of 700 or 725 is an excellent credit score. There should be no question of the person’s creditworthiness. However, if you were to have access to the applicant’s credit history, including all facets of that history you might be surprised the the 700 is based upon items that are only in the recent past.
If you were to look into the more distant past, say 10 or 20 years earlier, you may find a series of defaults that have gone off the books; student loans that are in arrears and other signs of financial mismanagement that, if one were to look at it today, the excellent credit score would likely crash and burn.
On the other hand, you have the worker making $32,000 per year at one job and another $8,000 or so at a second job, while his wife is making $25,000 at a third job, who are trying to keep their loans and other financial instruments current, while, at the same time, trying to put some aside for the future and who has a raised his credit score by more than 100 points because he and his wife have made it their business to pay back their loans and keep credit use to a minimum.
Whose credit score would you consider to be the excellent credit score ? Would you consider the person who is making minimal payments every month on major credit card debt, as well as paying down a rather large lease on a vehicle, to be a better risk? Or, would you consider the family that is keeping all of its payments up to date, putting something aside for a rainy day, while paying down a car loan, to be the better risk?
In the long run, creditworthiness – or the ultimate ability to repay a loan – is more important than just having an excellent credit score. The person living on the edge with the many credit cards, juggling income around to make sure everyone gets something and who, rather than owning a vehicle, decides to lease a vehicle that is well above his real ability to pay off, is not as creditworthy as the family that is struggling to bring its financial house back into order after a series of setbacks.
Those setbacks could have been:
- Long-term job loss for either spouse or both and both of whom have now found jobs where they are working to reverse the set backs
- Medical, where a major illness or long-term disease, has forced the family to use its savings, even to remortgage a property so they will have money to pay the bills
- Issues with credit card debt are so easy to have because it’s very easy to pull out the “plastic” to pay for something you know you shouldn’t buy in the first place
Yes, it does take time to reverse the decline in the credit score, but it can be done and one’s credit record can be cleaned up and turned around, while our friend on the edge lives from paycheck to paycheck praying he doesn’t get the boot. So, what is an excellent credit score ? It’s one of those questions that can only be answered with: “It depends!”