A Guide to Credit Score Scale
“Where you fall on the credit score scale is important. Let this guide help you. Check it out now!”
Our financial lives are dictated with terms such as credit score, credit ratings, credit history and so on. These are the terms which often crop up when you are applying for loans or credit cards. No money lender or a finance institution approves a loan without reviewing the applicant’s credit scores and credit history. Although, most people have a vague idea regarding what are credit scores, most of them are unaware about the credit score scale.
Credit Score Scale Guide
Credit score is a statistical technique of determining the probability of an individual repaying his debt within a specific period of time, by evaluating and analyzing his previous credit history. In short, it is your creditworthiness represented by a number. The evaluation and analyzing work is done by three credit bureaus namely, TransUnion, Experian and Equifax. These bureaus have their own parameters and mathematical formulas for deriving a person’s credit score. The software program that uses the mathematical formulas to find credit score is devised by Fair Isaac Corporation (FICO), hence the score is also called FICO score. The scores derived by each of these bureaus may vary slightly, owing to the differences in the information in their databases.
Typically, following parameters are taken into consideration while deriving a person’s credit score. A fixed weightage is assigned to each of these parameters, which is as follows:
Payment history (35%)
Outstanding current debts (30%)
Length of credit history (15%)
Types of credit accounts owned (10%)
New credit applications (10%)
Credit Score Scale Chart
The FICO scores are expressed in a numerical range of 300 to 850.
The credit scores between 760 to 849 are considered as least risky with a very high creditworthiness. The credit score of 850, which is an ideal credit score is the highest score possible in this range. People with excellent credit scores are entitled to fastest approvals and enjoy lowest possible interest rates.
The next best category is ‘great’ with credit scores in the range of 700 to 759. People in this credit score range also enjoy almost all the privileges as those with excellent ratings.
Good credit score range is a category in which most Americans falls. Credit score range of 660 to 699 is not a problem while seeking loan approvals. However, you may not get the best possible interest rates, enjoyed by the above two classes.
Credit score range of 620 to 659 is considered as low to medium risk. Although getting loans may not be an issue, getting them at affordable interest rates certainly is. People with fair or average credit scores should look for ways to improve credit scores so that they too can enjoy good interest rates.
You may have to run from pillar to post to obtain a loan, as money lenders regard poor or bad credit scores as high risk. Even if you manage to obtain a loan, you will have a tough time keeping up with the payments, owing to very high interest rates.
People who have very poor credit scores below 580 should consider credit repair before they approach a loan institution. Consistent efforts towards credit improvement may eventually help you attain a better credit score range. More at Credit Score Scale Guide