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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!”

All About Credit Score Scale

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.

Excellent
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.

Great
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
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.

Fair
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.

Poor
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.

Very Poor
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

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Credit Score Range: Understanding the Different Credit Score Ranges

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Different Credit Score Ranges

Your credit score is important. Very important. That three-digit figure is so influential that it determines your eligibility for credit cards, home and auto loans, student loans, apartment rentals and even some jobs. It’s vital to know your credit score range so you can decide which loans to apply for, know when you’re settling for less than you could get and, if necessary, take steps to rehabilitate your FICO score. Your credit score gives lenders an idea of whether they can rely on you to pay back your debts. It follows that your credit history, past and present, is among the data that credit bureaus use to calculate your score. If you’d like to get a grip on your score’s implications, read on: the nerds will clarify the finer points.

Lower score, higher interest
More than determining your eligibility for a loan, your score affects the cost to you, too. In fact, the score and the interest you pay are inversely proportional, roughly at a one-to-one ratio. So, as you boost your score, your monthly payments will generally decrease at the same rate. Let’s say you want to get some new wheels. To finance your slick new ride, you take out a 60-month fixed-rate auto loan of $15,000. If your score is in the gutter, say a 610, you’d pay $357 a month, according to myFICO.com. The guy next to you in the lot, with the Ray Bans on, has a superb score of 800. His score is about 30% better than yours—31.15% better, to be precise—as his monthly payment, at just $277, a 28.88% markdown. It’s clear that you’d rather be that other guy, who pays on time and keeps his debts low. Because once you start digging yourself a hole with late payments, it becomes harder to climb out, with the high rates weighing you down.

Understand your FICO score
The breakdown of credit score ranges is as follows:

630: Bad credit
You likely landed her because of bankruptcy, or because you’ve missed payments consistently—or, as is often the case with younger folks, you have no credit history at all. You’ll face higher interest rates and fees, and your choice of credit card is restricted. If you find yourself in this bracket and still want a credit card, a secured card is likely your best bet.

630-689: Fair (average) credit
Your score is average, and it’s probably because you have too much “bad” debt. If you’re holding onto some credit card debt or if your balance often grazes your credit limit, bureaus won’t trust you, and therefore lenders won’t either.

690-719: Good credit
Your rates are low, and you can choose from most cards, including those that earn rewards.

720-850: Excellent
If you’re in this bracket, take a look at cards with great fringe benefits. American Express, for example, offers premium cards that better accommodate the ritzy life.

Although these four categories are the standard, credit scores are still somewhat fluid, especially since the recession began. Since 2007, scores’ effect on consumers has become more severe, too, according to Paul Oster, the CEO of Better Qualified, LLC, which specializes in business and consumer credit services. “The impact of scores has changed dramatically,” Oster wrote in an e-mail. “Consumer’s credit scores can cost or save them hundreds of dollars a month. The ‘magic number’ has been increasing since the ‘R’ [the recession]. I know that 5 years ago 620 was a good benchmark, then it went to 640, 680, 720, and now 740. The average credit score is around a 685. Remember that scores are fluid and changing all the time. Studies show that individuals with an average credit score would reduce card finance charges by $76 annually if they raised their score by 30 points.” More at What are the Different Credit Score Ranges? Bad to Excellent and Everything In Between

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Credit Score: All You Need to Know

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All About Credit Score

Your credit score determines your eligibility for credit cards, home loans, car loans, student loans, apartment rentals and even certain job positions. It can mean the difference between a reasonable or exorbitant interest rate, and the difference between an affordable or excruciating insurance rate. There are few, if any, 3-digit numbers that hold so much power.

Where can I find my credit score?
Once a year, federal law entitles you to a free credit report from each of the 3 major credit bureaus. If denied credit, you’re eligible for an additional report. To view your free credit report, simply go to AnnualCreditReport.com.

Unfortunately, getting a free credit score is a little more difficult and a bit more costly. You can obtain your credit score from a number of websites, but they all demand a membership fee. However, the fee generally comes with a grace period in which you can avoid paying if you cancel your account.

What is a credit score? And how is it different from a credit report?
Your credit score—also known as a FICO score—is a 3-digit number that summarizes your creditworthiness. Ranging from 300 (worst) to 850 (best), your credit score tells lenders how likely you are to pay back loans. Your primary score is determined by Fair Isaac Corporation (hence “FICO”) and is considered the most accurate assessment. The 3 major credit bureaus (Equifax, Experian and TransUnion) also issue credit scores that vary slightly from bureau to bureau.

A credit report is an in-depth analysis of your creditworthiness issued by the credit bureaus, a detailed examination of the components that comprise your credit score. You’re entitled to a free report from each of the 3 bureaus once a year—twice if you’re rejected for credit. You should check your credit report regularly and report discrepancies immediately. Mistakes in credit reports happen more often than you might think and can have adverse effects on your credit score. You can view your free credit report (like really, truly, totally, 100% free) at AnnualCreditReport.com.

How is my credit score calculated?
Your credit score is contingent on a number of factors that can be summarized in 5 categories:

  • Payment History (35% of your FICO score): Making payments boosts your score. Missing payments destroys it. Recent history has a greater impact.
  • Amounts Owed (30% of your FICO score): Debt can hurt your score, though installment loans (like student loans) are actually beneficial if you keep up with payments. Your debt-to-credit-limit ratio is also important. Letting debt come too near your spending limit reflects poorly on your creditworthiness.
  • Length of Credit History (15% of your FICO score): The age of your accounts is taken into consideration. Old accounts earn more trust, while new accounts are regarded with suspicion.
  • New Credit (10% of your FICO score): This category looks at recent credit acquisitions and inquiries into your credit score. Too many new credit lines or too many inquiries in a short period of time look bad.
  • Types of credit used (10% of your FICO score): Different kinds of credit impact your score in different ways. The best way to score points here is to diversify your credit types.

How do I raise my credit score?
Establishing credit is easier than you might think. A good credit score starts with smart spending. More at What’s My Credit Score?

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