- 1 What is a Good Credit Score? FICO Ranges & Ratings Guide
- 2 Your Experian Credit Report and FICO ® Score are completely FREE. See them now!
- 3 Guide: Credit Score Range for Experian, TransUnion, Equifax
- 3.0.1 When is the last time you checked your score? Find out for free on Credit Sesame. No strings attached: we’ll never ask you for a credit card.
- 3.0.2 Yes, there are slight differences in your FICO and Vantage Score (which is what Credit Sesame uses). Get your credit score for free on Credit Sesame. No strings attached: we’ll never ask you for a credit card.
- 3.0.3 Get your free credit report card and credit score from Credit Sesame. No strings attached: we’ll never ask you for a credit card.
- 3.0.4 See how your score compares. Get your free credit score from Credit Sesame. No strings attached: we’ll never ask you for a credit card.
- 3.0.5 Question: What is the highest credit score you can have?
- 3.1 Trends and data and how it relates to credit scores
- 4 What You Need To Know About The New FICO Score That’s Coming Soon
What is a Good Credit Score? FICO Ranges & Ratings Guide
Are you asking yourself, “What is a Good Credit Score and why is it important?” Although credit scores go back all the way to the 1950s, it didn’t become really popular until the 1980s. Today, good credit scores are vital for receiving lower interest rates on car loans, credit cards, mortgages, etc. In a nutshell, a lender views a person’s score as a direct reflection of how financially stable they are.
This guide will clarify the ins and out of credit and credit scores, so one will be able to use this score to their advantage, regardless if they have good standing credit or not.
Credit bureau scoring is essentially the act of performing a background check on one’s financial history. This is vital in determining whether or not the borrower is likely to pay back the loan. Although credit companies primarily determine a person’s credibility through their credit score, other things such as the person’s bank account status and income are taken into account. In other words, one who has a bad credit score is not necessarily without hope, especially if they aim towards improving their score.
It’s against FCRA guidelines to base credit scores of off gender, race, age or zip code. FICO credit scores usually range from 300 to 850 points. The three main national credit data repositories are Equifax, TransUnion and Experian. These scores, however, are only calculated at the credit bureau. FICO itself isn’t able to determine a person’s credit score.
Pieces of data called scorecards are ultimately used to calculate FICO scores. Keep in mind that this data represents millions and millions of people. Therefore, extremely complex mathematical equations are used to set credit scoring guidelines. Basically, FICO analyzes the financial behaviors of millions of people, finding patterns that represent those who are most likely to pay off a loan, or debt in some cases. However, other factors such as social and economic difference among cities need to be taken into consideration. Both positive and negative financial patterns are considered while calculating a score. Missing a house, car or bill payment doesn’t mean that a person’s credit score will be permanently impacted. Not only is this calculating system a more accurate representation of a person’s financial stability, it gives those who have bad credit an incentive to be financially responsible. One can think of this scoring system as a typical high-school class, where both bad and good grades make up a final average.
Keep in mind that both credit bureaus and average underwriters use the same type of credit information. This eliminates unfair calculations and evens out the playing field. No agency has more access to a person’s credit history than another.
One of the things that is used to calculate credit scores is a person’s payment history, which includes things such as public records, collection items and frequency of failed payments.
Debts used to calculate scores include number of reported balances, average trade balance and the connection between total credit limits and total balances.
The overall age of a person’s credit history is a huge factor in determining the final credit score. One who has a relatively young credit history is unlike to get a very high credit score.
New credit includes any new accounts that have been opened up within the past year, along with the amount of time elapsed since the most recent inquiry.
In certain cases, credit is broken up into several categories, including mortgage, auto loan, bank/credit card, travel and entertainment, gift card, finance company references, installment loans and more. Having a personal finance company reference is a huge benefit for one to have under their belt.
Just about everyone has heard the terms ‘bad’ and ‘good’ credit, but they don’t really know which range is considered bad or good, along with the capabilities of each range. Keep in mind that there’s no written-in-stone benefits for each score range, as this will entirely depend on the business lending out the money. With that said, there are some common, universal advantages that come with each credit score.
FICO scores are typically based on a range from 300 to 850, whereas other score types differ somewhat in range, with some ranges being as low as 150 and as high as 990. Anything about a 700 is typically considered a good credit score, with an 850 being a perfect score
- Excellent Credit: 750 and up
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
- Bad Credit: Below 600
Now that the individual credit score ranges have been made clear, some benefits of each range will be mentioned, starting with excellent credit. One who has excellent credit will usually have a large number of options. In most instances, these people can finance a car or credit card at zero percent, along with plenty of more options. The ‘bad’ range, on the other hand, won’t qualify anyone for credit without paying high interest rates, down payments, collateral or a combination of many things, along with strict contracts. The ‘poor’ range may get someone qualified with slightly lowered interest rates and less contract guidelines. People that have ‘fair’ credit will typically get decent interest rates, but not without a down payment. ‘Good’ credit will more than likely qualify someone for low interest rates without a down payment. Again, nothing is set in stone and policies are entirely up to the lender, or business.
Payment History: 35 Percent
Almost near half of a person’s credit score is based off of their payment history, usually consisting of credit card, retail, installment loan, mortgage loan and finance company accounts. Also, main events, such as a person’s bankruptcies, judgments, liens, suits, wages and collection items, are considered while calculating a person’s payment history. Although analyzing one’s collection items may seem pointless, it actually gives credit companies leverage by using the person’s collection item as collateral. If a person’s collection item is valuable enough, they may get the entire loan, regardless of where their credit score stands. Not only are late payments investigated, but the amount owed, deadline duration and date of failed payments are investigated as well. Accounts that show absolutely no late payments heavily influence a person’s credit score in a positive way.
Another good portion of credit calculations include the the amount and types of debts that a person owes. Even if a person has bad credit, they can still gain trust from credit companies by having a few or several accounts with lots of money. Although the person may be less likely to pay off a debt or loan in time, they’re more than likely to pay it eventually because of the amount of money they have.
This score takes the total amount owed on all accounts into consideration. The total balance on one’s most recent statement is what usually goes into credit reports. However, the specific types of accounts and how much is owed on each one is calculated into this score as well. Interestingly, a person that missed payments yet has a low account balance is generally considered trustworthy, especially if most of the money went toward payments. A person who doesn’t pay payments yet has a good account balance, on the other hand, is likely to be considered untrustworthy.
Age of Credit History: 15 Percent
As already mentioned, longer credit histories tend to earn a higher credit score. This doesn’t mean that one with short credit history can’t earn good credit, however. First off, the total age of all the person’s accounts is taken into calculation. Note that the age measures the actual age of each account, so multiple accounts can mean longer credit history. Aside from the total age, the age of each individual account is checked as well, since certain types of accounts may qualify for better credit. Also, the time period between the last time the person had an active account is important as well. For instance, one who has had good-standing active credit accounts most of their life and stops using the accounts is likely to see a small drop in their credit score. In some cases, this can be overlooked by credit companies, depending on the amount of time passed since an account was last active.
One of the main reasons why credit companies consider new credit beneficial for credit scores is because opening new accounts requires a level of risk. This is especially true for those who have short credit history. However, do keep in mind that this short-term credit gain tactic may prove counterproductive later down the road if the person takes on more accounts than they can afford.
Overall, this category is scored by the total number of new accounts, how long they’ve been open, number of credit requests and other things of the like. Credit checks that are done for the sake of confirming accuracy don’t count. Also, the last time that a person had a credit report inquiry factors in as well. Although on-time payments are the most beneficial for credit scores, consistent late payments will also somewhat count. Most importantly, the overall credit of these accounts must be decent as well. Whether one wants to build credit through having multiple accounts, long-term accounts or a combination of both, they should make sure that they don’t take on too much financial responsibility.
Another small portion of one’s credit score involves the type of credit in use. The overall ratio of credit, retail, installment loan, finance company and mortgage accounts is the ultimate determining factor for this grading portion. However, having all of these accounts doesn’t guarantee a good credit score, especially if the person doesn’t plan to use one or more of the accounts. Naturally, bigger accounts will tend to earn higher scores. Good-standing installment loan accounts heavily increase this portion of one’s credit score as well. Having too many accounts can be counterproductive, as some look at this as a sign of bad decision making, given that the accounts are not in good standing. Other types of credit include non-resolving, resolving, secured, unsecured and short term loan credit. Mortgages, auto and student loans fall under the unresolved category. Secured credit, on the other hand, almost always involves some sort of collateral, such as a collection item. For instance, one who doesn’t pay their car payments doesn’t have to worry about interest, fines or even jail time, as their car will simply be repossessed.
Reason for Given Credit Score
Even after reading all of the above, one may still be surprised when they check out their credit score, wondering what went wrong. Although credit scoring is a very complicated process, there are four main reasons, or codes, for why a person got the credit score they have. These codes are required by regulations to be included in each and every credit report. It’s also important to know that these four codes don’t outline the positive aspects of one’s credit score, but rather the negative aspects. For instance, one may see this upon looking at their credit score: too many late payments, credit history too short, too much time elapsed since last active account and high-dollar debts. Again, these codes only explain why the person didn’t receive a better score. Note that seeing these codes doesn’t necessarily mean one has a bad score. Even people who have the highest credit scores still see these four codes showing why they couldn’t score even higher. Only the most significant factors are included into these codes, so the codes don’t explain absolutely everything.
How Credit Inquiries Impact Credit Scores
A credit inquiry is nothing more than a request on a credit report that records a business’s requested credit report. Anytime that a person’s credit score and overall history is checked, a credit inquiry is recorded. There’re two primary types of credit inquiries: hard and soft. A car dealership requesting a person’s credit report would be considered a hard inquiry since the person originally initiated the credit report request by renting a car. Hard inquires have an impact on the person’s credit score, whereas soft inquires don’t. Some examples of soft inquires include the consumer requesting a credit report themselves or some other third-party requesting a report for reasons other than confirming the person’s financial stability. Only businesses that have been approved by the federal Fair Credit Reporting Act can request someone else’s credit report. Aside from soft and hard inquires, there are two other types: mortgage and auto loan inquiries. Both mortgage and auto loans tend to cause a person’s credit to be checked more often. As a result, any additional credit runs will be excluded by credit companies, leaving no impact on one’s credit score. This usually includes additional credit checks that occurred within the last 30 days. However, the initial credit check will count towards the credit score.
The three national credit companies mentioned earlier have their own specific guidelines on how things are scored, giving consumers insights on how they can improve their financial and business relationship with that particular credit industry. However, each of the three companies’ grading systems are pretty similar. Fortunately, FICO gives consumers the opportunity to choose between the three industry-type scores for bankcards, auto, installment and finance company lending. Upon requesting an industry-type score, the universal FICO score is calculated. From there, this score is combined with the scorecards of the desired industry. One score card mentions negative aspects of the person’s credit history, while the other scorecard doesn’t. When it’s all said and done, one will see both their FICO and industry-determined score. Both scores are useful for different financial scenarios. The type of credit score an approved business requests depends on what plan they’re trying to make with the consumer.
As already stated, FICO scores are one of the ways that businesses determine if a person is trustworthy for a loan or not. Now, FICO credit scores are used by a number of different industries and businesses. Most FICO scores are within the 300 to 850 range. The three main types of FICO scores are Equifax, Experian, which is split into two codes, and Trans Union, which is split into the well-know four codes discussed earlier. Although these FICO scores are highly effective at determining financial risk, they’re somewhat limited. For one, these scores tend to leave out other important aspects, such as late payments made, repeated offenses and the like. In some ways, FICO scores are more strict than newer score systems such as FICO 08. However, FICO 08 is stricter in some ways as well. Depending on what the situation calls for, a business may either choose to use an industry-type score, FICO, FICO 08 or some other score.
Although the traditional FICO scores are still highly effective to this day, there are some flaws in the scoring system that have been resolved with newer score types, such as the FICO 08. At a first glance, one may get the idea that FICO 08 grading systems are much more lenient. After all, they’re more forgiving toward those who make late payments. On the same token, FICO 08 scores penalize repeat offenders much more severely than original FICO scores would. However, they do put more attention to those who have multiple credit types. Also, FICO 08 tends to look down on those who use high portions of their credit. Overall, this scoring system doesn’t mind those who make late payments, as long as the consumer doesn’t go overboard. One can rightfully conclude that the FICO 08 scoring system was designed for those with low income, due to the system being more lax on late payments. Furthermore, the system eliminates people with high incomes by penalizing those who use a high percentage of their credit.
Interestingly, the vantage score was the very first credit system that was created by the three main national credit companies, Equifax, TransUnion and Experian. The scoring system was based off of an analysis of around 15 million people. In fact, a vantage score is essentially the combined score of all three credit companies, hence the name vantage. This gives consumers, credit companies and other businesses a more predictable, accurate scoring system. Unlike most credit scores that range from 300 to 850, vantage scores can be as high as 990. Also, vantage scores are based off of a much longer time period, usually at least 24 months. Much like the FICO 08 scoring system, vantage penalizes those who are late on mortgage payments. Going back to the credit report inquires, FICO excludes additional inquires with a 45-day time frame, while vantage’s timer period is significantly shorter, a mere 14 days. In a way, this can be good news for one’s credit score whenever a credit inquiry is made.
Just recently, a new scoring system was created by FICO to integrate a variety of changes. All in all, these scores are highly effective at predicting financial behavior. As a matter of fact, these newer generation scores have twice as many, around 80, variables compared to the original FICA scoring system. On top of that, this scoring model uses a total of 18 scorecards, whereas the original scoring system only had 10 scorecards. Similar to FICA 08 scores, the new generation scores have a range between 150 and 950. As one can see, the newer scoring system has a much lower beginning range, unlike many other scoring methods. As of now, FICO offers three types of these new generation scores: Pinnacle, Advanced Risk Score and FICO Risk Score. In summary, these more recent scoring systems revolutionized the very way that credit is scored.
In order to determine the likely hood of an individual filing bankruptcy, FICA created a specific scoring system to measure just that. Simply put, this scoring system is based off of the number of times a person filed bankruptcy in their entire life time. Bankruptcy types are as follows: BNI 3.0, Bankruptcy Score and Delphi. Keep in mind that those who started out with excellent credit won’t be affect by bankruptcy nearly as much as someone who started off with bad credit. Also, those who started off with no credit whatsoever will be affected by bankruptcy just as bad. Chapter 7 bankruptcy will stay on record for up to 10 years. Any other type of bankruptcy stays on file for around seven years. Contrary to popular belief, a bankruptcy doesn’t mean that someone won’t be able to have good credit within that 10 or seven-year time frame. It will, however, make it significantly harder to improve both credit and bankruptcy scores.
How to Improve Credit Scores
The best way to improve one’s credit score over time is to pay off credit payment on time. Another nice thing to know is that the impact of negative variables diminishes over time. Because these variables are constantly aging and changing with time, one can never expect their credit score to be the same, even after not committing to anymore credit obligations. In this case, the person’s score will continue to decline as both the negative and positive aspects age. Therefore, it’s important to retain some credit responsibilities. Another effective trick is to transfer funds from one credit account to another. What this does is increase the available credit on that account, which in turn positively impacts one’s credit score. This can, however, prove to be counterproductive in certain cases, so process with caution. On the flip side, keeping a low available balance in one’s credit account may be helpful. However, the only true fire way to improve credit is to fulfill as much credit responsibilities as possible without going overboard. This includes opening different types of credit accounts, applying for loan, mortgages and the like. In a nutshell, it really boils down to disciplining one’s budget and spending habits. Always think about long-term gain rather than short-term pleasure.
Tools for Increasing Credit Score
Beware of websites that claim to fix credit overnight, as some of these websites are complete scams. Just remember that building or repairing credit takes discipline, hard work and most importantly time. Credit industries do offer tools, such as CreditXpert, for correcting credit scoring mistakes. Other helpful tools include Essentials and What-If Simulator. Not only do these tools fix errors, but they give helpful tips to consumers on the different ways that they can improve their credit score. CreditXpert Essentials promotes the idea of pay-downs, opening and closing new accounts, transferring funds between accounts and many more helpful actions. CreditXpert Detective, on the other hand, finds database and credit errors in credit reports. CreditXpert What-If Simulator allows one to safely witness the consequences of different credit actions. The possibilities and outcomes with this simulator are nearly infinite. However, using a combination of all three tools is ideal. These tools combined with patience and good spending habits will drastically improve one’s credit score in time. As always, one can do a quick Google search and find hundreds of different blogs and articles discussing different ways to improve credit scores. With that said, do make sure that the blogs or articles are from credible sources. Most importantly, don’t buy into scams that claim to improve credit scores overnight.
Fixing Incorrect Credit Information
Although not common, a person may run into unfortunate credit errors upon checking their credit score. If errors do happen to be the case, then one needs to not worry since the FCRA, or Fair Credit Reporting Act, gives the credit agency a maximum of 30 days to investigate the situation. However, most investigations are completed within a few days. Overall, credit agencies take these kind of errors very seriously, especially when it comes to identify theft or mortgage decisions. Anyone who believes to have one or more errors in their report should contact either Equifax, Experian or TransUnion. In certain cases, there may only be errors in only one of industry-type scores. Most bankers are able to pinpoint where the credit error originated from. Whatever one does, they should not hold off such an investigation, as doing so can further progress the error, whether from identify theft or some other error. Extreme cases of errors usually require disregarding the credit score all together, starting from scratch. This happens to be the policy that most lenders and investors follow. The three national credit companies mentioned throughout this guide have their own website as well. Here, one can gather all the information they need to fix whatever errors occurred, as well as improve existing credit scores.
Assistance for Filing a Dispute
All credit reports ran through Credo come with a completely free disputation service. When one calls the FCRA, they’ll receive friendly service, telling them how to go about solving the dispute. Upon investigation, Credo will contact all credit agencies and fix whatever errors. Plus, the consumer will be frequently updated about the investigation. Once all the errors have been discovered, they’ll be replaced with correct updated information. This entire process must follow strict time frames and procedures as well. When everything is all said on done, one then requests Rapid ReCheck, which quickly processes the updates. Before one knows it, they’ll receive a credit report showing their most current, correct credit score.
Today, credit companies are finding ways to look past credit scores. Because there are a growing number of people today who don’t believe in credit or debt, nor want it, credit companies are beginning to realize that a lack of credit doesn’t necessarily mean a lack of financial trust and responsibility. Many of these people pay their bills on time and have a healthy bank account balance.
As a result, credit companies created something called the Anthem Report from Credo, which analyzes a person’s payment history, such as rent, insurance payments and the like. These payment activities accurately represent a person’s financial stability, if not more. This scoring system is extremely beneficial for younger people, eliminating the need for debt all together. These young people have enough school debts as it is. Perhaps later in the future, there’ll be a universal scoring system that analyzes non-credit payment history.
There are plenty of people today who have no credit history, yet are financially stable. Thanks to Anthem Credo, people can now make non-traditional loans and mortgages. The report is very affordable and doesn’t require one to have any credit history. Obviously, this score is rated very differently than traditional scoring methods. As with traditional scores, one can negatively impact their non-traditional credit score by not making payments on time, over-drafting bank accounts and other negative actions. Most importantly, this system allows people to build credit while avoiding debt entirely.
Created by the federal government in 2004, the FACT Act was primarily designed to give consumers the right to access their credit reports and scores upon request, among other things: Each of the three main national credit agencies must provide consumers with a credit report each year. This also includes the removal of incorrect information, especially in identify theft cases. Any information a business receives from a suspected fraudulent person must be notified to the real consumer. Identity theft is a problem that always needs immediate attention.
In addition to the FACT Act, the three main agencies had to offer consumers a free credit report every year upon the consumer’s request. Prior to this new rule, people had to inconveniently wait for their annual report.
Credit Report Does Not Equal Credit Score
A credit report only lists things such as payment history, credit history and the like, not credit scores. If one wants their credit score, they’ll have to request one along with their annual credit report. One can think of a credit score as a quick summary of a credit report.
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Your credit score. It’s amazing how much this one little three-digit number can affect so much of your life, especially when it comes to buying, or rather, borrowing money to purchase something. Whether you are applying for a car loan, a home mortgage or even a credit card, one of the first things a lender will do is check your credit score rating to see how good your credit is.
Based on this information, as well as other variables, the lender will then approve or deny your credit application.
Credit is borrowed money provided to you as a loan, so that you may purchase goods or services when and as you need them. The money typically comes from a credit issuer, like a bank or financial institution, who is then paid back over a certain agreed upon amount of time.
Credit usually comes with a finance charge (known as interest) that is paid in addition to the initial amount of money that you borrow. In most cases, the borrower is required to make a minimum or fixed payment each month that goes toward repaying the debt. The amount of money you are allowed to borrow, as well as the interest you will pay, is partially determined by your credit score rating and where it lies on a credit score chart.
As mentioned above, your credit rating is a three-digit number. If you’re looking for a credit score definition, it is that a credit score is the result of a mathematical algorithm used to evaluate your past relationship with credit. This past relationship is known as your credit history. Your credit history and credit score tend to predict your future creditworthiness or rather, the likelihood that you will repay a loan and make your payments on time.
Although several different scoring systems exist to determine whether you have good credit, FICO and VantageScores are the two popular models. Both of these scoring methods use a sliding scale, and both range from 300 to 850.
Breakpoints along the scale represent, generally, whether your credit is bad, fair, excellent, or somewhere in between.
Below is a credit score range chart that shows the different categories and their ranges. Keep in mind that every creditor defines its own ranges for excellent, good, fair, poor and bad credit. Some consider anything above 720 to be excellent.
The following table gives the general numerical ranges that fall into various categories, from excellent to bad credit scores.
FICO is a brand name. The term FICO comes from the company Fair Isaac Corporation, which created credit risk scoring in 1960 as a way for financial industries to expand their customers’ access to credit. It is still the most popular scoring method used by lenders in the United States. Fair Isaac and each of the three major credit bureaus, Equifax, Experian and TransUnion, generate scores.
In order to have a FICO score, you need to have at least one account that has been open for six months or longer, and at least one account that has been reported to the credit bureau within the past six months. They can be the same account. Also, there can be no indication of “deceased” on the credit report. If you share a joint account with someone who died, you may need to close the account before your score can be generated.
Interestingly, each of the three major credit score companies collects credit data, but they don’t share information between themselves. Many creditors report to just one or two of the bureaus, so scores tend to vary by a few points. Most people have a range of credit scores that are similar, not all identical scores.
The numerical scale for FICO scores is 300 to 850. Industry-specific FICO scores range from 250-900. The industry-specific scores are most often used to determine whether you can qualify for a loan to buy a home, purchase a car, or get a credit card.
When is the last time you checked your score? Find out for free on Credit Sesame. No strings attached: we’ll never ask you for a credit card.
Depending on what you are trying to purchase, a lender can rely on any of several versions of the FICO score, including FICO, FICO 8, FICO 9, FICO Auto and FICO Bankcard scores. All three credit bureaus generate all of those types of FICO scores. Regardless of which version is used, it is important to remember that the higher your score, the better.
VantageScore is a relatively new scoring system and was created in 2006 by Equifax, Experian and TransUnion as a competitive alternative to FICO. It was designed as a way to keep the scoring “in-house,” in other words, since the three must pay to use FICO’s scoring algorithm. Most free credit scores available online are VantageScores.
Ken Chaplin, Senior Vice President of TransUnion, states that while VantageScore has a credit score scale that is similar to FICO, it uses different criteria to calculate credit scores, so you may notice a difference between your FICO score and your VantageScore. For example, VantageScore uses alternative data, 24 months of historical activity, and also factors in reoccurring payments such as utilities, rent or phone bills.
There are several VantageScore versions with score ranges that vary. For example, if the lender uses VantageScore 2.0, the range is 501 to 990, but if they use the 3.0 version, the scale ranges from 300 to 850. As with FICO, you still want a higher score to show that you are creditworthy.
All three credit reporting agencies provide both FICO scores and VantageScores.
FICO and VantageScore use the same basic criteria to calculate scores. FICO also tells us how much each factor matters (VantageScore keeps that information private).
FICO and VantageScore use different algorithms to calculate scores. VantageScore claims to more accurately score people who have “thin” files – people who have limited data in their files, including those folks who pay their bills responsibly but tend to avoid credit.
For them, nontraditional data may be used to calculate a score. That might include utility and cell phone account histories, rent payment history and other data.
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The FICO credit score range is 300 to 850 in most cases. Many versions of the FICO score exist, though, and some use different ranges. For example, some of the FICO scores used by the auto and credit card industries are between 250 and 900. Also, the FICO NextGen score ranges from 150 to 950.
The VantageScore also ranges from 300 to 850. Previous versions ranged from 501 to 900.
Many consumers also ask, “What is a bad credit score?” The answer to both questions depends on who you ask, but we can answer in a general way. Here is a sample FICO score chart showing where many lenders make their cutoffs:
A lender can define these categories any way it wants to. Some lenders consider a 720 credit score to be excellent. Another lender might call a 620 credit score fair. If your score falls somewhere near a cutoff point, you should work toward solid footing in the closest higher category.
In any case, higher scores represent lower risk that the consumer will default on a credit obligation.
A score that is not good or excellent does not preclude a consumer from financial products. In fact, there are credit products available to individuals anywhere on the credit spectrum. You can find credit cards for bad credit, mortgages for bad credit and bad credit loans via a simple Internet search.
The important consequence of bad credit is that the best products and the best terms are out of reach. In other words, you can get a credit card with bad credit, but it may be a secured card, not a traditional card. That means you’ll have to put down a deposit in order to open the account.
Car insurance premiums are almost always higher for consumers with poor credit. On the mortgage side, the interest rate for a borrower with bad credit could be three or four times higher than the best interest rate available.
The highest FICO score is, theoretically, 850. In reality, an 800 credit score or higher is considered elite. FICO claims that it is, indeed, possible to reach its highest number. However, scores can change every time new data is reported to the credit bureaus, so an 850 credit score might not stay at that level. It is really just a snapshot of a moment in time.
Furthermore, since there are dozens of different scores, it’s entirely possible (and even likely) that not all of a consumer’s scores would hit the ceiling at the same time.
Yes, there are slight differences in your FICO and Vantage Score (which is what Credit Sesame uses). Get your credit score for free on Credit Sesame. No strings attached: we’ll never ask you for a credit card.
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The range for most current scoring TransUnion uses is 300-850.
TransUnion used to offer something called a TransRisk score, which also fell between 300 and 850. This score is now called the TransUnion New Account Score 2.0. It is designed to help financial institutions manage existing accounts. This score tells the lender how likely you are to default in the next 90 days.
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Experian generates FICO scores and VantageScores, which currently range from 300 to 850. Experian also generates the PLUS Score, which falls on a scale of 330 to 830. The PLUS Score is not used by lenders, but is a consumer-only score. It is sometimes offered for free online.
Experian also generates business credit scores and reports and background checks for landlords.
Finally, Experian provides the data on which a CE Score is based. The CE Score is generated by CE Analytics, and ranges from 350 to 850. It used to be free online but is no longer available; it is not used by lenders.
Equifax generates the same FICO scores and VantageScores offered by the other bureaus, and the range for current scoring models is 300-850. The Experian Credit Score offered on its website is actually a VantageScore.
Experian also offers a National Equivalency Score, which ranges from 360 to 840. This is a credit score mainly offered to creditors to aid them in their portfolio analysis (not to make lending decisions), and was previously offered for free on Credit Sesame.
This overview of credit score ranges is far from exhaustive. As we mentioned earlier, there are many types of credit scores, and within each type, many versions that have been developed over the years.
A credit report is not the same thing as a credit score. Your credit report is the document that shows your credit history, going back seven to ten years. The credit report shows your identifying information, your employment history, open and closed trade lines (loans, credit cards), collection accounts, inquiries that have been made into your credit, and public records such as bankruptcy and liens against you.
Here is an example of what your credit report would look like:
- Bank accounts
- Marital status
- Employment status
- Political affiliation
- Medical history
- Criminal record
- Interest rates you pay
- Rewards accounts
- Most utility accounts and cell phone accounts, unless in default
- Payday, title loans and other nontraditional credit products unless in default
- Accounts and public records that have aged off the report
The report also won’t reveal your spouse’s credit history, but may show your spouse’s name if you own credit accounts together.
Your credit report is generated by all three credit reporting agencies. You are entitled to receive a free copy from each bureau once every year by visiting AnnualCreditReport.com.
Get your free credit report card and credit score from Credit Sesame. No strings attached: we’ll never ask you for a credit card.
If you are looking for a credit card, quite a few good credit cards are on the market right now to meet almost any credit need. Here are a few to consider:
Chase Slate® offers a $0 introductory balance transfer fee for transfers made during the first 60 days of account opening. After the introductory balance transfer fee offer is over the ongoing balance transfer fee is either $5 or 5% of the amount of each transfer, whichever is greater.
Chase Slate® has no annual fee, and does not impose a penalty APR for paying late. All other account pricing and terms apply.
The Capital One® VentureOne® Rewards Credit Card is well-suited for those who want to earn rewards for travel.
New cardmembers who qualify can spend $1,000 on purchases within 3 months from account opening for a one-time bonus of 20,000 miles. Miles won’t expire for the life of the account and there’s no limit to how many you can earn . The Capital One® VentureOne® Rewards Credit Card has no annual fee and no foreign transaction fees.
Capital One® Secured Mastercard® (pictured on the left) is for those who want to build or rebuild credit.
You can get an initial $200 credit line after making a security deposit of $49, $99 or $200, determined based on your creditworthiness and get access to a higher credit line after making your first 5 monthly payments on time with no additional deposit needed. The Capital One® Secured Mastercard® has no annual fee.
Answer: A credit score is considered “good” by most lenders when it falls in the range of 640-719 on the 850-point scale used by FICO. Each credit bureau uses the data it has on you (which may not be the same data the other bureaus have) to calculate your FICO credit score, so you can expect your Experian, TransUnion, and Equifax credit scores to differ by up to 20 points, or even more if you have an especially thin credit file (a thin file is one that doesn’t have much data).
Approximately 21% of Credit Sesame members have credit scores that fall within the “good” range. The credit score range is based on TransUnion’s scoring model.
Lenders look at where you credit score is within broad ranges and pay less attention to the exact number. So, while it matters a great deal whether you have a 600 credit score or a 680 credit score, it matters less whether your credit score is 680 or 700, since both scores are considered “good.”
Answer: In this average credit score range someone with a 600 credit score, for example, may be able to open a store card or a secured credit card or there may be credit cards that offer rewards for individuals who are eligible for credit cards within this range.
Someone with a “fair” credit score might be approved for car loans, or even a mortgage, but the interest rates on those loans will tend to be higher than the interest rates offered to people with higher credit scores.
If you are approved for a loan while your credit score is in the “fair” range, and it subsequently goes up to the “good” or “excellent” range, you may be able to save money by refinancing your loans at lower interest rates.
Nearly half of Credit Sesame’s members are in the good to excellent credit range.
The median Credit Sesame user has an average credit score in the “fair” range of 550-639.
See how your score compares. Get your free credit score from Credit Sesame. No strings attached: we’ll never ask you for a credit card.
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Answer: A 720 credit score and anything up to the highest possible credit score of 850, is considered “excellent” by many lenders. You don’t need to have a perfect credit score in order to take advantage of an excellent credit score — in this credit score range you are likely to pay lower interest rates on car loans and mortgages than someone with a 700 credit score. Just 19% of Credit Sesame members have credit scores in the “excellent” range.
You may also have an easier time getting approved for the more exclusive credit cards which may come with a high annual fee. Those cards may also offer perks that offset the annual fee and they may earn rewards.
Having an excellent credit score can save you money on interest charges and make your travel cheaper and more comfortable. Actual savings vary depending on account usage and payment behavior.
Question: What is the highest credit score you can have?
Answer: The highest FICO credit score is 850, but most people will never have a “perfect” 850 credit score. A person with an 850 credit score has a long history of on-time payments, with no delinquencies or defaults, a wide variety of revolving and installment loans, like car loans, mortgages, credit cards, and student loans, and no recent applications for new credit.
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Answer: Most people experience their credit score gradually increasing throughout their career as they establish more lines of credit, a longer history of on-time payments, and the average age of their credit accounts increases.
Besides making on-time payments and waiting for your credit history to grow, it also helps to manage your credit utilization rate.
FICO scores are lowered when the credit bureaus see you using more than 50% of your total available credit or more than 50% of your available credit on any one credit card.
Believe it or not, your credit score can be greatly improved just by making sure you never use more than half of your available credit.
Answer: In order to build a healthy credit score, it’s helpful to have a variety of different credit cards and loans on your credit report. But on the flip side, applying for too much credit too fast can actually hurt your credit score by indicating to the credit bureaus that you may be taking on more credit than you can handle responsibly.
Trends and data and how it relates to credit scores
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The mortgage industry is undergoing a major change in the way it determines eligibility for mortgages. In June, 2016, Fannie Mae lenders began using a new loan underwriting system that considered trended data.
Trended data allows a lender to see more past financial behavior – up to 30 months – in a new light. The data showed whether the applicant tended to carry credit card balances, paid just the minimum, or lowered his overall debt month by month.
Previously, the credit scoring system rewarded consumers who paid bills on time, even if they carried debt for years or decades (“revolvers”).
Maxed out credit cards hurt, it’s true, but if a consumer has a combined credit limit of $20,000, he can have a 750 credit score (or better!) while indefinitely carrying around $6,000 of debt, making little or no effort to pay it off.
Trended data underwriting rewards people who not only pay their bills on time, but also consistently pay more than the minimum each month and steadily improve their debt utilization ratio (“transactors”).
As it turns out, payment behavior is viewed as highly predictive of the likelihood the borrower will repay the debt. Transactors, then, represent a much lower financial risk to mortgage lenders and those lenders will now start looking for that kind of financial behavior in applicants.
Keep in mind lenders, credit card issuers, and other financial institutions use a variety of different types of credit scores as well as other criteria to make credit and lending decisions.
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What You Need To Know About The New FICO Score That’s Coming Soon
The Greek philosopher Diogenes once said, “There is nothing permanent except change” and this is true in the world of lending as it is in the rest of our lives. Lending is constantly changing, which means that the way we are scored needs to be updated periodically and in line with this here comes the latest – FICO Score 9.
Even though you may be afraid of the term “credit score” it’s important that you know yours and how it affects your personal finances. Lenders generally look at credit scores as follows:
Between 700 and 850 – Very good or excellent credit score
Between 680 and 699 – Good credit score
Between 620 and 679 – Average or OK score
Between 580 and 619 – Low credit score
Between 500 and 579 – Poor credit score
Between 300 and 499 – Bad credit score
When you apply for any kind of credit, the first thing the lender will do is look at your credit score. As you can see from the ranges shown above, if you have a credit score of less than 580, the odds are that you will be turned down or, best case, charged a very high interest rate. If you don’t know your credit score it’s critical that you get it before you next apply for credit – or you could be in for a very unpleasant surprise.
Credit scores are a three-digit representation of how creditworthy you are. Landlords, creditors and other creditors use it to decide if you should be given a credit card or a loan and how likely it is that you will repay the money. To put this another way, your credit score is a way for lenders to predict how risky you would be as a creditor.
While there are literally dozens of different credit scoring models, the first and most popular is the FICO score. It was developed by a company then called Fair Isaac Corporation as a way to simplify the whole credit granting process. Prior to FICO lenders were required to sit down and carefully analyze your credit report line by line. Plus, they had to review your reports from the three credit reporting bureaus because they could be and often were different. As you can imagine this was both tedious and time-consuming.
The models for scoring created by FICO are considered to be the gold standard in terms of deciding consumer risk. Virtually all the credit granting businesses use them. For example, in 2013 alone lenders bought from FICO an amazing 10 billion scores to decide who would be granted loans or credit cards. However, things change over the years and FICO generally keeps creating new models to tackle these changes and do a better job of predicting how creditworthy a person would be. The newest in this long line of credit scoring models from FICO is FICO Score 9 and is to be released this summer.
FICO Score 9 will be much the same as FICO Score 8. However, FICO said in a recent press release that it will have better “predictive power” and will consist of a better representation of a person’s creditworthiness. Andrew Jennings, who is FICO’s chief analytic officer was quoted as saying, “Our innovative, multi-faceted modeling approach incorporates a more exhaustive characteristic selection process to build a score that is even more effective across a wide variety of situations.” To put this in simpler terms, FICO Score 9 is to do a better job than FICO Score 8 of predicting how risky you are.
As noted above, there are three credit bureaus that provide scores to both lenders and individuals. They are Experian, Equifax and TransUnion. One thing that has made it tough for lenders to get the maximum value out of the credit scores they purchase is that there is sometimes a wide variation between the three bureaus regarding an a person’s score. In fact, when a lender orders a credit report it is not uncommon that each bureau provides a somewhat different score. These inconsistencies can sometimes be quite large, which makes it confusing for both creditors and individuals. So, according to FICO one of the biggest improvements that will come with FICO Score 9 is that these differences will be less apparent, which will make it faster and easier for lenders to decide whether or not they want to issue credit to an individual.
This change coming from FICO is just one of the many new scoring models that are on their way. The new ones are expected to focus on individual industries. As an example of this, there will be different scoring systems between credit cards, auto loans and mortgages. This is due to the fact that lenders are searching for ways to grant credit to new customers while still adhering to a number of historically important guidelines.
FICO will have more details about Score 9 as it comes closer to releasing it. You should pay close attention to this so you’ll know how you might or might not be affected by these changes and your ability to get new credit.
Check your credit report
While it’s important for you to know your credit score it’s equally important for you to see your credit reports. The law entitles you to a free copy of each of your three reports once a year. You can choose to get them from each of the credit bureaus or altogether on the site www.annualcreditreport.com. People who are credit wise generally get one of their free credit reports every four months. This represents a way to kind of monitor your credit without having to pay a company to do it. Reviewing credit reports isn’t much fun but it’s important that you look over each one carefully. A study released last year by the FTC (Federal Trait Commission) showed that nearly 20% of us have credit reports that contain errors and that 5% of us have errors so serious they are affecting our credit scores.
When you go over your credit report the negative items to look for include late payments, skipped payments, defaults, bankruptcies, charge offs, tax liens and collections. If you find any of these in one of your credit reports it’s important to make sure they are legitimate and not errors. If you do find errors you can dispute them with the appropriate credit bureau by writing a letter and enclosing whatever documentation you have to prove your claim. The credit bureau will then check with the institution that provided the negative item and ask that it be verified. In the event that the institution cannot verify or fails to respond within 30 days, the credit bureau must remove it from your credit report, which could lead to a nice boost in your credit score.
If you do need to dispute something in one of your credit reports, here’s a video on the right way to construct a dispute letter.
Your credit life is ruled by that little three-digit number called your credit score. It’s critical that you know your credit score especially before you apply for a big loan such as an auto loan or mortgage. You need to get and review your credit reports so that you can dispute any errors that could be affecting your credit score. And finally, be sure to watch for more information about FICO Score 9 so you will know how it might affect your credit score and your financial life.