Credit Score Ranges – What You Need to Know

Credit score range checklistCredit. It’s a tiny word that packs a powerful punch. Your credit, based on your score and history, is not only an indicator of how much of a risk you pose to new creditors but also how responsible you may be as an employee, a volunteer, or a renter. Nearly everyone from credit card issuers and banks to landlords and corporations analyze who you are, financially speaking, based on this three-digit number. That makes it necessary to understand what is considered “good” or “bad” credit.

While there are many different purposes for which credit scores are used in today’s financial world, one thing remains constant. Having a good credit score can help you achieve your financial goals while a bad credit score can hold you back. The credit scoring system is basically an algorithm that pulls in information from various sources and calculates your individual score based on specific activities and metrics.

The two main credit scoring systems: VantageScore and FICO, use a sliding scale ranging from 300 to 850. Where you fall on this scale at any given time determines if your credit score is good, bad, or somewhere in between. Here’s the breakdown:

Score Range Credit Category
750 and Up Excellent Credit
700 to 749 Good or Strong Credit
650 to 699 Fair Credit
550 to 649 Poor Credit
550 and Below Bad Credit

The credit score ranges listed above seem pretty straightforward, but the truth is new creditors impose their own interpretation of excellent and bad credit, and the scores that fall in between the two. For example, some financial institutions consider any credit score above 720 to be excellent, while others view a credit score of 600 or below to be bad. Even though creditors impose their own interpretation on your credit score, the range above should provide a good guide.

The Formula for Excellent Credit

No matter which brand of credit score is used, the calculation is based on the same factors. To have excellent credit, you need to take certain steps in your financial life. Here are your marching orders:

  • Make on-time payments on all credit accounts. For FICO and VantageScore credit scores, timely payments have the most significant impact over time.
  • Keep a healthy level of credit utilization. Typically, the credit score algorithm is improved when you use less than 30% of your available credit limits on revolving accounts, like credit cards and lines of credit.
  • Don’t apply for new accounts all the time. Be mindful of new credit account inquiries as these may lower your credit score.
  • Have a variety of accounts. A mix of revolving credit accounts like credit cards and installment debt, like auto or personal loans, boosts your credit score calculation.
  • Keep accounts open. Even if you aren’t actively using a credit card, it helps to leave the account available to you for the long haul. Your credit score improves when you have a long history of responsible use.

Credit scores can seem confusing at first, but once you understand the range you need to be in to have excellent credit and the factors that determine your total credit score, you are on the right path. Take the time to learn these credit score basics so you have more opportunities for new, affordable credit when you need them.

Posted on January 5, 2018 by in Credit Monitoring

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