What Your Credit Score Range Really Means
Knowing where your credit lies on the credit score range is important. Depending on your score and ranking, you will receive lower interest rates and are more likely to be approved for loans and credit cards. There are two different credit reporting agencies, Equifax and Transunion. Each has their own approach to determining scores, but overall, they report the similar results. Generally, a company will look at one’s credit report in a general way and focus on one’s credit score as a whole. This makes understanding your credit score that much more important.
Credit Ratings and What They Mean
Lenders usually typically use this rating chart to determine where one stands in terms of their credit score and what rates they will receive.
Excellent (Scores 780+) – Individuals with a rate of 780 or over will enjoy the best interest rates on the market. They also will typically always be approved for a loan.
Very Good (Scores 779-720) – This is considered near perfect and individuals with a rate in this range will still enjoy some of the best rates available.
Good (Scores 719-680) – An individual who has a credit score that falls within this range has good credit and will typically have little to no trouble getting approved for the new credit.
Average (Scores 679-620) – While this is still a good range, individuals with this score will receive slightly higher interest rates than those with higher scores. According to Equifax, at the end of 2012, the average national credit score was 696.
Poor (Scores 619-580) – Scores in this range indicate the individual to be a high risk. It may be difficult to obtain loans and if approved, they will be paying a lot in terms of interest.
Very Poor (Scores 579- 500) – Scores in this range are rarely approved for anything, but credit can be repaired.
Terrible (less than 500) – Individuals whose credit scores are less than 500 will not get approved for new credit and should seek credit improvement help.
Factors That Affect A Credit Score
Typically there are five different factors that determine the calculation of a credit score, however, three of them make up 81% of the overall total. These factors are:
- Recent Credit (30%) – This indicates any time that one’s credit has been checked and shows that the consumer has been applying for more credit. This indicates a risk for those who already have a large amount of debt.
- Payment History (28%) – This is determined by the repayments they have made to lenders or creditors. This ultimately reflects on how frequent they pay their loans or bills on time.
- Utilization (23%) – This shows the amount of outstanding debt the consumer has in terms of what they think they can handle overall.
What is most important to know about credit is that it can improve or it can fall. This makes paying bills or loans on time increasingly important for someone that may be applying for new loans or a mortgage in the future. Also, lowering one’s overall debt will also dramatically increase a score.