Credit Score Ranges

Written by Robert Ferry on November 2, 2021
Credit Score Ranges

Credit score ranges can be confusing. You may wonder what a good credit score is or how to get your credit score in the excellent range. The truth is, there isn't one definitive answer to that question. Your FICO credit score will fall within a specific range based on your credit history and current financial standing.

You want to be in the best range possible when it comes to your credit score. This means knowing what the different ranges mean and understanding how your FICO credit score fits into them. This blog post will go over what each credit score range means and how to make sure your FICO credit score is within a good range.

What is a credit score range?

Have you ever heard of this score, but you don't understand what it means? Well, a credit rating is an arithmetic number used to describe a person’s creditworthiness. It takes into account information such as debt repayment history, outstanding debt, and the age of your accounts.

The FICO credit score ranges from 300 to 850, with 850 as the best possible score. A good credit rating is anything above 700, while a bad credit rating is below 500.

However, different institutions have different ways of rating borrowers, so it's important to know the minimum credit score for the loans or lines of credit you're interested in.

If your scoring range is 900 rather than 300, you have been deemed a good borrower. This translates to loan applications sailing through with ease and getting loans with low-interest rates.

Which is the best credit score range to have?

With credit scoring, the best credit score one can have 850. Scoring of this caliber means that you have an excellent credit rating and are deemed a low-risk borrower by lenders.

Some people might be wondering if it's possible to have a perfect credit score. The answer is no; there is no such thing as a perfect credit score because each person's credit profile will always reflect some level of risk.

The benefit of having a high credit score is that you will likely get approved for any loan or line of credit you apply for and receive low-interest rates on what you borrow.

What is a poor credit score range?

On the other hand, if your credit score falls in the range of 300 to 599, this is generally considered a poor credit score. One may want to avoid this bracket if one can.

A score in this range may result in getting turned down for loans or lines of credit and, if approved, having to pay higher interest rates.

What is considered a fair credit score range?

A fair credit score generally falls in the range of 700 to 850. Most lending institutions consider anything above 700 good, while a few may accept 650.

To get to this credit range, one must be faithful with their debt repayment. Otherwise, failing in your obligation will lead you to slump down the credit scoring. 

Which is the average credit score?

The average scoring will range from 600-to 750, with some institutions going slightly higher or lower. The average credit score for most people is 698.

Can you get a free credit score?

The major credit referencing bureaus offer clients a free credit score once per year. This is a great opportunity to check their scoring and make appropriate measures. If you need more reports, you will have to pay a small fee.

What is a credit rating?

Have you ever heard of this score, but you don't understand what it means? Well, a credit rating is an arithmetic number used to describe a person’s creditworthiness. It takes into account information such as debt repayment history, outstanding debt, and the age of your accounts.

The credit rating runs from 300 to 850, with 850 as the best possible score. A good credit rating is anything above 700, while a bad credit rating is below 500.

However, different institutions have different ways of rating borrowers, so it's important to know the minimum credit score for the loans or lines of credit you're interested in.

If your score is closer to 900 than 300, you are deemed a good borrower. This translates to loan applications sailing through with ease and getting loans with low-interest rates.

What's included in your credit score?

Several factors affect your credit score:

  • Payment history (thirty-five percent)
  • Amounts owed (thirty percent)
  • Length of credit history (fifteen percent)
  • New credit accounts (fifteen percent)
  • Types of credit used (credit mix) (ten percent)

Payment history

Remember that loan you took out to buy a new car? Or the one you used to pay for your honeymoon? How well you repay your debt encourages lenders that you will repay their loan. They'll look at how often you've made payments on time, as well as how much debt you currently have outstanding.

We cannot reiterate how much your payment history impacts your credit score. One late payment can have such a significant impact on your ratings! 

Amounts owed

Lenders want to know if you're maxed out on your credit cards or if you have a lot of outstanding loans. The more obligation you have, the higher the risk to lenders.

Lenders are keen to know if you have exhausted your limit or are about to. For example, if you have a $20,000 credit limit and are charged $15,000, you're using 75% of your available credit. This is a sign to lenders that you may be overextended and are at risk of defaulting on your loans.

Having more loans is a clear sign that all is not well with your finances, and that’s a big red flag for many lenders. 

Length of credit history

Having zero credit history is bad for a borrower. Lenders want to be sure that you can repay borrowed money. If you don’t have a credit history, lenders are not sure if you will refund since there are no patterns to compare with. 

Creditors will also compare your oldest to your newest accounts. The older your oldest account, the better. New credit accounts are weighed more heavily than old ones, so it's important to keep your accounts open and in good standing for as long as possible.

New credit accounts

If you think opening several new accounts will boost your credit score, you are in for a rude shock. This is because lenders may see this as a sign that you're in financial trouble and are desperate for credit.

When evaluating your new credit accounts, lenders will look at how long you've had the account, how much debt you've charged to it, and whether or not you've made on-time payments.

Opening many new credit accounts reek of desperation, which is never a good sign. This can be interpreted as a sign that you're not good at managing your finances and may lead to defaulting on your loans.

Types of credit used

The various categories of credit you have will also come into play. This includes student loans, Buy Now Pay Later, and car loans. The more diverse your categories, the more likely your loan application will sail through. 

If you lean more on credit cards than other types of loans, your credit score may not be as good as someone who has a more diverse mix of credit. This is because lenders see people who rely on credit cards too much at risk of defaulting on their loans.

The above factors will go a long way in painting a picture of your creditworthiness. 

Keep in mind that the debt you have and the repayment history will play a massive part in the credit score. So if you want to improve your credit rating, you need to focus on paying your bills on time and keeping your debt levels low.

What are the standard Credit Rating Programs?

It's common to find different credit bureaus having different ratings.

In the world of creditworthiness, two credit rating programs dominate VantageScore & FICO scores.

The FICO score is the more popular of the two and is used by 90% of American lenders. VantageScore is also becoming more popular, as it's used by about 30% of lenders.

How does FICO work?

FICO uses two models to come up with your credit score: the base FICO score and the industry-specific.

The Base FICO score is what creditors turn to know the probability of a lender repaying their loan. This rating is an essential factor in determining your borrowing power. It tells lenders how long you've depended on credit, what kinds of loans or debts may be affecting that score, and even where to find out more about this person's financials!

The other type of FICO rating, the Industry-Specific rating, you can get a customized score that will help your creditworthiness in specific industries. 

For example, there are different scores for mortgage, auto, and credit card issuers. This score is based on the same information as the Base FICO score, but it's tailored to the specific type of lender that's considering your application.

Your FICO score will be different depending on which model the lender uses.

The Base FICO Credit Score

This credit rating ranges from 300-850, and it's the rating that will show if you are a flight risk with debt. You can find out how much you're worth to a lending institution by looking at the credit rating.

It's important because it lets lenders know if they should take more risk in loaning money to people who may not afford them financially.  

Here is a more intricate look at the Base FICO rating;

800-850Exceptional
740-799Very Good
670-739Good
580-669Fair
300-579Poor

According to FICO, two-thirds of the population has a good or excellent credit rating in America.

The industry-specific FICO score

This credit rating ranges from 250-900, and it's tailored for specific types of lenders.

This score is based on the same information as the Base FICO score, but it's tailored to the specific type of lender that's considering your application.

Everything you need to know about VantageScore

VantageScore is a credit rating program that the major players in the credit referencing industry use.

This score is used by about 30% of lenders in America, and it ranges from 300-850. It's similar to the FICO score, with a few notable differences.

For starters, the older models ranged from 501 to 990. But the newer models took a different approach, VantageScore 3.0 & 4.0 following FICO with ranges from 300-850.

Here is a detailed look at VantageScore ratings:

781-850Excellent
661-780Good
601-660Fair
500-600Poor
300-499Very Poor

In America, a FICO® Score is considered the score that creditors use when deciding whether or not you'll be able to repay your debts. The average person's credit rating has increased by seven points 2020-leaving many with an OKAY chance at getting loans in future years because they are considered less risky than before!

But this increase doesn't mean everything; each lender might define what good/bad means, leading some people with higher scores to have difficulty finding finance options while other low-scorers may find lots available right away even though there wasn’t much demand before.

Tips for improving your credit score

One can do a few things to boost their credit ratings if it's not where you want it to be.

Make payments on time

With credit scores, nothing beats payments on time. If you can master this, you will most definitely improve your credit rating. No one can give you a free credit score; you will have to work for it. 

If you're having trouble making all of your payments on time, try setting up a budget and automatic payments so that you never forget. You can also set reminders on your phone or calendar to ensure you're always on top of your payments.

Reduce your debt levels

The less debt you have, the better it looks to lenders. So if you want a better credit rating, start paying down your balances as much as possible.

You can use a personal budget to stay on top of your finances and avoid unnecessary debt. And if you have any high-interest debt, try to pay that off first, so you're not wasting money on interest payments.

Don't take loans to repay others

Don't, we repeat, don't take more loans to repay old loans

This may seem like common sense, but some think taking out a new loan to repay an old one will help their credit score.

Unfortunately, this has the opposite effect. Lenders see this as a sign of financial instability, which could lead to your credit score dropping even further.

Build a long credit history

Long credit history is pleasing to the eyes of lenders. Open a credit account to pay off the debt, as this will be a tremendous asset down the line. 

If you've had a few late payments or missed payments, it could take a while for your credit score to recover. But with time and good financial habits, it will eventually rebound.

Credit utilization rate

The credit rating also takes into account the credit utilization rate. The utilization rate is the ceiling to borrow against the borrowed amount. 

The higher the credit utilization rate, the more likely you will decline a loan application. The rate should fall below 30% at any particular time. 

Counter check your credit reports

Sometimes, differences can occur in your credit reports that are out of your control.

If you're not sure what's on your credit report, or if there are any errors, you can get a free credit score annually. If there are any errors on the document, you will easily correct them!

Then, if you see anything that's incorrect or needs to be disputed, you can take action to have it corrected. Like Buy Now Pay Later providers, some lenders are notorious for their inaccurate credit reports, so it's worth checking these every few months.

What does not affect your credit score?

The credit rating reflects one’s ability to repay loans for all its intent and purposes. 

This means that some things, like your race or religion, will not affect your credit score. Nor will the fact that you're single, married, have kids, etc. Only your financial history and actions will bear the credit rating.

Here are a few things that have zero impact on your credit score

Personal Information

There is nothing about your personal details that will determine your creditworthiness. This includes details like your name, date of birth, address, etc., all of which will not feature in the report.

Your credit does not include any of this info, which does not affect your score.

Credit inquiries

When you make a loan application, your personal information will be transmitted to the lender so that they may conduct an inquiry on whether it's worth taking out business loans with this person.

These inquiries will not affect your credit score in any way and are simply used to measure how risky you are as a borrower.

On top of that, when you make your inquiries on the credit score, they will also have no impact.

Changes in your income

One may be tempted to think that a change in income could lead to a change in one's credit score.

The credit rating is based on a person’s borrowing history and financial habits, and it doesn't discriminate against people with current incomes.

So don't worry if your income dips for a month or two - it will have no impact on your credit score.

Paying small bills

Do you see that small business that you pay often? Well, there is little chance of them reporting you to credit bureaus for late payments.

Local service providers, such as lawn care companies and pest control firms, cannot usually report their payments on your credit reports. So if you don't pay for services rendered, then it won’t show up in the reporting systems of these small business owners.

However, they could still affect you if they turn to debt collectors for prolonged non-payment, which can land on your credit report.

Paying other people's bill

When you see someone's suffering from financial burdens, the temptation would be to help by paying their bills.

Paying other people’s bills will not end up on any of your ratings. This is because it looks like you're struggling financially and cannot manage your expenses.

If you want to help someone out, try lending them money instead of just outright paying their bills for them.

Unsuccessful loan application

When you apply for a loan and it is declined, this will not show up on your credit score.

The lender may make a hard inquiry on your report, but this will also have no impact on your credit score.

Only successful loan applications will be included in your credit history and affect your score.

Financial Planning Tips

People's main concern about credit ratings is that they don't want their loan applications declined in the future.

Here are a few things that will prove helpful in your financial well being;

Making budgets and sticking by them

It's not always about making a restrictive budget but finding a budget that works for you.

Think about your regular expenses and try to factor them into your budget. This could include rent/mortgage, groceries, transportation, etc.

Save as much as possible

Once you have all of your regular expenses accounted for, then it's time to start saving money. Try to save at least 20% of your income every month.

Think about it, having savings will come in handy in case of an emergency in the future without slipping into debt. 

Regularly checking your credit report

It's vital to be proactive about your credit rating by regularly checking your credit report for errors.

If you find any inaccurate information, raise the issue with the lenders or the credit reference bureau.

Credit counseling

Credit Counseling is perfect for people with undesirable financial lifestyles. One can sort out their mess and build future beaming with hope and financial freedom. 

Don't take unnecessary debt

Debt is highly addictive, and it can easily lead to an endless run.

But, before you know it, you're finding it hard to make ends meet and make all due payments.  

Try your best to avoid unnecessary debt and only take more if, and only if, it is indispensable. 

Cut back on unnecessary purchases

This can be an arduous task with new clothes staring at you every time you visit the mall.

But, if you can manage to reduce your spending on unnecessary things, you'll have more money to put towards debt payments or savings.

Conclusion

Credit score has a significant impact on our lives. It's not only about getting a loan; it also reflects our overall financial health.

So, we must take the necessary steps to improve our credit rating. If you follow the tips mentioned in this article, then you'll be on your way to a better credit score.

What is a good credit score? Well, it's different for everyone as it depends on your financial history and current situation. A simple late repayment can stay on your credit report for years to come and damage your credit score, so it's essential to be mindful of this when you're considering taking on new debt.

Article written by Robert Ferry

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