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 three different credit reporting agencies – Experian, 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.
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 720-779) – This is considered near perfect and individuals with a rate in this range will still enjoy some of the best rates available.
Average (Scores 680-719) – While this is still a good range, individuals with this score will receive a little higher interest rates then those with scores above them. According to Equifax, at the end of 2012, the average national credit score was 696.
Poor (Scores 580-679) – 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 or less) – Scores in this range rarely are approved for anything, but credit can be repaired.
Typically there are five different factors that determine the calculation of a credit scores, however three of them make up 81% of the overall total. These factors are:
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.