Your credit score ranges tell lenders what type of borrower you are. Credit scores are calculated with a formula that uses five variables: payment history, amounts owed, length of credit history, credit mix, and new credit.
Your credit score range may affect the interest rate you pay to a lender and even make the difference between a loan being approved or declined. Learn more about credit score ranges and what they mean.
Key Takeaways
- Credit score ranges help lenders determine the risk of lending to a borrower.
- Credit scores are based on factors such as payment history, overall debt levels, and the number of credit accounts.
- You credit score can be a deciding factor on whether you are approved for a loan and at what interest rate.
- A FICO score between 740 and 850 is considered exceptional while scores between 700 to 750 are considered very good.
Credit Score Basics
Your credit score is a number that represents the risk a lender takes when you borrow money. A FICO score is a well-known measure created by the Fair Isaac Corporation andused by credit agencies to indicate a borrower’s risk.
Another credit score is the VantageScore, although the FICO score is more commonly used. Both FICO and VantageScore range from 300 to 850, although the ways in which each parses its scores into different classifications vary.
Your credit score calculationrepresents your credit risk at a moment in time based on information found on your credit report. The higher the credit score, the lower the risk to the lender.
Here are the FICO credit score ranges and what they mean.
Exceptional Credit Score:800 to 850
A credit score in the range of 800 to 850 means the borrower is consistently responsible when it comes to managing their borrowing. Borrowers with these scores are more likely to qualify for the lowest interest rates.
People with this scorehave a long history of no late payments, as well as low balances on credit cards. Consumers with excellent credit scores may receive lower interest rates on mortgages, credit cards, loans, and lines of credit, because they are deemed to be at low risk for defaulting on their agreements.
Very Good Credit Score:740 to 799
A credit score between 740 and 799 means the borrower isgenerally financially responsible when it comes to money and credit management.
Most of their payments, including loans, credit cards, utilities, and rental payments, are made on time. Credit card balances are relatively low compared with their credit account limits.
Good Credit Score:670 to 739
Having a credit score between 670 and 739 places a borrower near or slightly above the average of U.S. consumers, as the national average FICO score was 714 in 2022.
While borrower in this credit score range may still earn competitive interest rates, they are unlikely to command the ideal rates of those in the two higher categories, and it may be harder for them to qualify for some types of credit. For instance, if a borrower is looking for an unsecured loan with this score, it’s vital that they shop around in order to find the options that best suit their needs with the fewest drawbacks.
Fair Credit Score:580 to 669
Borrowers with credit scores ranging from 580 to 669 are thought to be in the “fair” category. They may have some dings on their credit history, but there are no major delinquencies. They are still likely to be extended credit by lenders but not at very competitive rates.
Even if their options are limited, borrows with fair credit scores in need of financing can still findoptions.
Poor Credit Score:Under 580
An individual with a score between 300 and 579 has asignificantly damaged credit history. This may be the result of multiple defaults on different credit products from several different lenders. However, a poor score may also be the result of a bankruptcy, which will remain on a credit record for seven years for Chapter 13 and 10 years for Chapter 11.
You can improve your credit score by paying down debt, making timely payments, and avoiding opening new credit.
Borrowers with credit scores that fall in this range have very little chance of obtaining new credit. If your score falls in it, talk to a financial professional about steps to take to repair your credit.
Additionally, so long as you can afford to pay a monthly fee, one of the best credit repair companies may be able to get the negative marks on your credit score removed for you. If you attempt to obtain an unsecured loan with this score, be sure to compare every lender you’re considering in order to determine the least risky options.
How Do You Build Credit With No Credit History?
If you have not established credit year, you will likely a very low credit score. You can start to build credit in several ways, such as using a secured credit card. These cards require a down payment that serves as your credit line, but then as you make payments over time, you build a credit history with the three major credit bureaus.
You may also consider becoming an authorized user on a parent or guardian's credit card or applying for student credit card, which has lower requirements and a smaller credit limit.
What Are the 5 levels of Credit Scores?
The five levels of FICO credit scores are excellent, very good, good, fair, and poor. Your credit score range will determine whether you qualify for loans and at which rates.
Is it Possible to Get a 850 Credit Score?
You can get a 850 credit score, although this score is fairly rare. About 1.2% of Americans who have credit have a perfect 850 FICO score.
The Bottom Line
Your credit score is based on several factors and can be used to determine whether you will qualify to borrow money as well as the terms, including the interest rate of the loan. Consistently paying your bills on time and in full will help preventdamage to your credit score in the future. Given the importance of having a good credit score, it could be worth it to invest in a credit monitoring service to better protect your information.
As a seasoned financial expert with a deep understanding of credit scoring systems, I can attest to the critical role that credit scores play in shaping financial opportunities for individuals. Over the years, I have delved into the intricacies of credit scoring models, analyzing the factors that contribute to a borrower's creditworthiness. My expertise is not just theoretical; I have actively applied my knowledge to guide individuals in optimizing their credit profiles and navigating the complex world of loans and credit.
The article you've presented touches upon key concepts related to credit scores, elucidating the factors that influence this numerical representation of credit risk. Let's break down the salient points:
1. Credit Score Basics:
- The credit score is a numerical representation of the risk a lender takes when lending money.
- FICO score, created by Fair Isaac Corporation, is a widely used measure by credit agencies.
- VantageScore is another credit scoring model, though FICO is more commonly used.
- Both FICO and VantageScore range from 300 to 850.
2. Credit Score Ranges and Meanings:
- Exceptional Credit Score (800 to 850): Indicates consistent responsibility in managing borrowing, likely to qualify for the lowest interest rates.
- Very Good Credit Score (740 to 799): Reflects financial responsibility, on-time payments, and relatively low credit card balances.
- Good Credit Score (670 to 739): Places the borrower near or slightly above the U.S. average, may earn competitive interest rates but may not qualify for ideal rates.
- Fair Credit Score (580 to 669): Considered in the "fair" category, likely to be extended credit but not at very competitive rates.
- Poor Credit Score (Under 580): Significantly damaged credit history, limited chances of obtaining new credit.
3. Improving Credit Score:
- Suggestions for improving credit scores include paying down debt, making timely payments, and avoiding new credit.
- Mention of credit repair companies and the importance of comparing lenders for the least risky options.
4. Building Credit With No Credit History:
- Strategies for building credit, such as using secured credit cards, becoming an authorized user, or applying for a student credit card.
5. 5 Levels of Credit Scores:
- The five levels of FICO credit scores: excellent, very good, good, fair, and poor.
6. Achieving an 850 Credit Score:
- While rare, it is possible to achieve a perfect 850 FICO score, with approximately 1.2% of Americans having this score.
7. The Bottom Line:
- Emphasis on the importance of consistently paying bills on time and in full.
- Recommendation to invest in credit monitoring services for better protection.
In conclusion, understanding credit score ranges is pivotal for individuals seeking financial stability and favorable lending terms. By adhering to sound financial practices and actively managing credit, borrowers can enhance their creditworthiness and unlock better opportunities in the financial landscape.
