What Are All the Credit Score Ranges? Here's Your Go-To Guide Is your credit score good enough to lead the life you want? We explain the various credit score ranges and how to boost your financial stability.
Let's face it: Your credit score is one of the most critical numbers in your life.
It can determine everything from the interest rate you pay on a car loan to your chances of qualifying for a mortgage or student loan. So it's essential to understand what different credit score ranges mean and how your score affects your financial life.
Here, you'll learn the different credit score ranges and how they apply to you. You'll also learn tips and tricks to improve your credit score if it's not where you want it to be.
What is a credit score?
A credit score is a number that lenders use to decide whether or not to give you a loan. It's based on your credit history, a record of how you have handled borrowing and repaying your debt.
A high credit score means you have a good history of borrowing and repaying debt, so lenders are more likely to give you a loan. A low credit score reflects a poor record of paying what you owe, making lenders less likely to provide you with a loan. Fair credit is somewhere between the two.
Many factors can affect your credit score, including your payment history, amount of credit card debt, length of credit history and types of credit accounts. You can gauge your creditworthiness from various sources, including credit reporting agencies and financial websites.
What are the different ranges that make up a credit score?
The most common credit score range is 300 to 850. The Fair Isaac Corporation (FICO), which created the most widely used credit scoring system, uses this credit range.
The highest possible credit score is 850, and the lowest possible score is 300. According to Experian, one of the three major credit bureaus, a score above 800 is considered excellent credit, good falls between 720 and 799, and below 580 is considered poor credit.
What are the different types of credit scores?
There are many different types of credit scores, but the most common one is the FICO credit score mentioned above. This FICO score ranges from 300 to 850, with a higher number indicating a better credit score.
Other types of credit scoring models include the VantageScore 3.0 Score, which ranges from 300 to 850, and the Experian National Equifax Risk Score, which runs from 330 to 830. Early versions of the VantageScore credit score went from 501 to 990.
What is a good credit score?
A credit score is a number that reflects the risk a lender takes when extending credit to you. The higher your credit score, the lower the risk to the lender and the more likely you will be approved for a loan or credit card.
A good credit score is typically anything above 700. However, scores can range from 300 to 850, and the definition of a "good" score will vary depending on the lender. For example, some lenders may consider a score of 680 good, while others require a score of 750 or higher.
Generally, the higher your credit score, the better your chances of qualifying for favorable terms and rates.
If you're planning on applying for credit soon, you'll want to check your credit score and work on boosting it if necessary. Improving your credit score will increase your chances of being approved for the types of loans or new credit cards you're looking for.
What are the consequences of having a low credit score?
Although the best credit comes with the best perks, having a low credit score can have many consequences. The most obvious is that it can make it challenging to obtain a loan or line of credit from credit card issuers.
Lenders typically use credit scores to assess an individual's credit risk, and a low score might signal to them that you're not a good candidate for a loan. With low credit, your available credit will be relatively limited even when approved for a credit line.
If you can obtain financing, you may pay a higher interest rate than someone with good credit. This is because lenders view borrowers with bad credit as more likely to default on their loans, so they charge higher rates to offset this risk. On the flip side, when you fall in the excellent credit range, you will likely get lower interest rates on new accounts.
A low credit score can make renting an apartment or getting insurance hard. Landlords and insurers often use credit scores as part of their decision-making process, and they may be less likely to offer you housing or coverage if your score is low.
Lastly, having a low credit score can impact your ability to get a job. Many employers now run credit inquiries as part of the hiring process. These aren't usually hard inquiries that negatively impact your credit score.
Employers may be reluctant to hire someone with bad credit. Therefore, it's crucial to understand the potential consequences of having a low credit score before making any decisions that could negatively impact your score.
How to get help if you have a low credit score
A low average credit score can significantly hinder achieving your financial goals. Getting a loan, credit card or even a mortgage can make it difficult. If you have a low credit score, follow these tips today.
Order a copy of your credit report
The first step is to get a copy of your credit report from all three credit reporting agencies (e.g., Equifax, Experian and TransUnion). This will give you a clear picture of where you stand and what you need to work on.
Most people can get a free credit score from each major credit bureau once a year. You can order them online or by mail; they typically arrive within a few weeks.
That said, be wary of third-party agencies offering to check your score for you, especially if it's to see whether or not you qualify for loans or credit accounts — this can negatively impact your score because it counts as a hard pull against your credit.
Start building your credit score
Once you have your credit report, you can start working on improving your score. This may involve paying debts, correcting errors and building positive payment history.
Here are some quick tips for increasing your credit score over time:
- Pay your bills on time: This is one of the most critical factors in your credit score, so be sure to pay all of your bills on time, every time. Try to limit late payments, and avoid missed payments at all costs.
- Keep your balances low: Try to keep the balances on your credit cards below 30% of your credit limit. Doing so will help improve your credit utilization ratio, which is a critical factor in your credit score.
- Use a mix of credit products: Lenders like to see that you can manage different types of credit, so try to use a combination of credit products, such as credit cards, auto loans and personal loans.
- Check for errors: There may be errors on your credit report that are dragging down your score. If you find any, dispute them with the credit bureau.
A credit score is a three-digit number that reflects your borrowing and repayment history. Understanding what goes into your credit score and the different ranges that make up this rating is essential.
Knowing where you stand can help you take steps to improve your credit rating if it falls within a lower range. The day to start building your score is today.