Credit Score Ranges Can Make Or Break You

You’re probably wondering what is considered a good score and where you stand in that regard. Typically any score that is 740 or higher is “Very good”. Anything lower could mean higher interest rates, lower approval odds and smaller lines of credit.

When I first started out building my credit I had a Washington Mutual secured card for almost a year after I put down $300 initially. The beauty of a secured card was that once you build your credit you can cancel it and get your deposit back.

Well, I should say at the time I thought that was great, however, I later learned that you shouldn’t ever cancel any credit cards that are in good standing.

By using this secured card and making my payments on time every month, my score soon jumped up to 720 within a year of having the card. This was the only thing I had on my report.

It’s actually funny how I learned about secured cards. After I graduated high school I moved to Texas at the age of 18 and I worked for Sears Roebuck. This was right after they purchased K-mart.

Long story short, I was one of their call center agents for an internal department that dealt with higher end customers directly.

One day, I had a customer on the line that was having issues with his store card, after I assisted him with his issue, he bragged about having a score over 800.

Being the guy I am, I was instantly curious. So I asked him how he achieved this and he was more than happy to go on a very long rant about payment history, amount you owe on credit cards, credit history, new credit and types of credit.

After I told him I was just starting out building my credit, he recommended a secured card then gave me advice on how to go about applying for one. To be honest, this was the best advice that I had ever received at the time.

Why does your credit score matter?

loan-applicationYour credit score matters because it helps banks, insurance agencies, landlords and employers determine your credit worthiness. Having a good credit score can help you obtain a better rate typically when you’re shopping for car loans, credit cards, and insurance.

When Equifax first started expanding back in the early 1960’s, a majority of their business was made up of running credit checks for insurance companies. Often times, you wouldn’t get a decent rate on your insurance if you had a low score. This basically means that you’d pay more per month for your insurance compared to someone else with better credit.

Who determines your credit score?

There are three major reporting agencies that determine your score. Transunion, Equifax, and Experian. These three companies are trusted by all lenders. They have an established history and have been around for years. You should pull your report as often as possible to ensure that all your information is accurate and up to date.

How is your score determined?

whats-your-credit-scoreThere are 5 contributing factors to how your score is calculated in order to help lenders determine your creditworthiness when you apply for credit:

  • Payment History (35%) – When you pay your cards on time, this is one of the most important factors that lenders consider before issuing a line of credit. You want to make sure that you have no late payments and never miss a scheduled payment. The longer history that you have of making your payments on time, the better it looks to lenders because it shows them that you’re not only responsible, but you can also be trusted.
  • Amount Owed On Credit (30%) – This is the total amount of money that you owe to existing creditors. This is also referred to as Utilization and it is the second most important factor in determining your score. While higher amounts owed are not necessarily a negative factor, you want to consider the amount of credit used compared to the amount of that you have available. A rule of thumb is to keep your balance under 10-20% of your overall spending limits. So if you have a credit card with a limit of $3,000, you don’t want to carry a balance of more than $300-600 per month at the end of your closing statement.
  • Length Of Credit History (15%) – Your length of history is really important because it shows lenders that you have a track record of borrowing money and paying it back on time from multiple lenders. It basically shows how responsible you are and that you’re capable of paying back the money that they lend you. Your length of history also ties in directly to your payment history. Even if you have a good length of history, you want to be sure that that history is of accounts in good standing. 670-credit-score
  • New Credit (10%) – This is when you get approved for a new line of credit and the lender in question reports your new account to the reporting agencies. New accounts can help and hurt your credit at the same time depending on how many new accounts are added to your report over a short period of time. They can help you by increasing the amount of you have available for all of your credit cards, however. Many people use the shopping card trick in order to help them increase their available spending limit which is ideal for utilization.
  • Types Of Credit (10%) – Many lenders consider the type of diversity that you have on your credit profile. This could be Mortgage loans, Car Loans, Store Cards, Personal Loans and more. This isn’t a huge factor but the more diverse your history is, the better odds you have of receiving a decent rate.

credit-score-rangesWhat type of credit score ranges is there?

811-scoreThere are many scores out there such as VantageScore, Plus Score, TransRisk score and Equifax score. The most commonly used score, however, is FICO Score which can range from 300-850.

Credit Ranges What does it mean? 
(Exceptional) 800 – 850 When you have a score in this range, you’re at the very top of the totem pole. Very few people achieve a score over 800. You will absolutely qualify for the best possible rates any Lender offers.
(Very Good) 740 – 799 If you’re in this category, you’re going to qualify for some of the better rates from every Lender. You shouldn’t have an issue getting approved for pretty much anything you apply for.
(Good) 670 – 739 This score allows you to pretty much get approved for whatever you apply for since many Lenders consider this an acceptable range. If you’re denied, however, it may be due to items on your report.
(Fair) 580 – 669 In this range you’re considered Subprime. Receiving a loan may still be difficult, however, you still have a better chance of getting approved, however, your interest may be higher than normal.
(Poor) 579 or lower When you have a poor score, many Lenders consider you a higher risk than someone with a higher score than you. You may not qualify for credit, if you do, you’ll most likely pay a very high-interest rate.

You can view the follow chart below in order to give you a better idea of what your credit score range is:

Poor FICO Score Fair FICO Score Good FICO Score Very Good FICO Sore Exceptional FICO Score
579 669 739 799 850
578 668 738 798 849
577 667 737 797 848
566 666 736 796 847
565 665 735 795 846
564 664 734 794 845
563 663 733 793 844
562 662 732 792 843
561 661 731 791 842
560 660 730 790 841
559 659 729 789 840
558 658 728 788 839
557 657 727 787 838
556 656 726 786 837
555 654 725 785 836
554 653 724 784  835
553 652 723 783 834
552 651 722 782 833
551 650 721 781 832
550 649 720 780 831
549 648 719 779 830
548 647 718 778 829
547 646 717 777 828
546 645 716 776 827
545 644 715 775 826
544 643 714 774 825
543 642 713 773 824
542 641 712 772 823
541 640 711 771 822
540 639 710 770 821
539 638  709 769 820 
538 637 708 768 819
537 636 707 767 818
 536 635 706 766 817
535 634 705 765 816
534 632 704 764 815
533 631 703 763 814
532 630 702 762 813
531 629 701 761 812
530 628 700 760 811
529 627 699 759 810
528 626 698 758 809
527 625 697 757 808
526 624 696 756 807
525 623 695 755 806
524 622 694 754 805
523 621 693 753 804
522 620 692 752 803
521 619 691 751 802
520 618 690 750 801
617 689 749 800
616 688 748
615 687 747
614 686 746
613 685 745
612 684 744
611 683 743
610 682 742
609 681 741
607 680 740
606 679    
605 678
604 677
603 676
602 675
601 674
600 673
599 672
598 671
597 670
596
595
594
593
592
591
590
589
588
587
586
585
584
583
582
581
580

Its never too late to improve your credit score.

fix-your-creditIf your credit score is not perfect right now, don’t stress. Just continue to rebuild and your score will improve over time. Chances are if you have bad credit right now, it took you a while to get where you are today.

The same applies to rebuilding as well, it simply takes time. If you haven’t done so yet, it is highly recommended that you start by pulling your report to see where you stand. Then you can refer to my article on how to remove negative items.

Feel free to leave any comments below with questions, concerns or compliments!