It’s an important piece of information that can easily impact the course of your life. For something that plays such a huge role in our lives, the credit score is not well understood. We can get our credit score from credit cards, banks, or many other sources, but do we really understand what it means? What are the credit score ranges, and what do they mean?
Credit Score Ranges
A credit score can range from 300 to 850 and is used by creditors to determine your ability and reliability to handle credit. There are 5 ranges that consumers should be aware of. While where the lines fall between the ranges may vary depending upon who you ask, these are general guidelines that can be used by consumers.
- Exceptional (800+): Consumers with exceptional credit will generally experience easy credit approval as well as be offered the best rates.
- Very Good (740-799): A very good rating is above average. Consumers with this rating will qualify for better interest rates.
- Good (670-739): The median credit score falls in this range. Consumers with a good rating are considered an acceptable risk to lenders.
- Fair (580-669): These consumers may experience difficulty securing new credit, and will be offered higher interest rates.
- Poor : (Below 580): Consumers with a poor rating will often be rejected for credit unless a cosigner is used. Utilities and credit card applicants with a poor rating may require a fee or deposit.
How Credit Scores Are Calculated
Many factors go into the very complicated calculation of a credit score, some factors weighing more heavily than others.
- 10% Type of credit used
- 10% New Credit
- 15% Length of Credit History
- 30% Total debt and percent utilization of current credit lines
- 35% Payment history, or whether payments have been on time or late.
Average Credit Score
People may be interested to know where they stack up against everyone else. In 2016, the average FICO score was 699.
A person’s credit score can influence many important financial decisions. Consumers should not only know what their credit score but also what it means, how that number is calculated and what credit score range they fall into.
How about you, Clever Friends, do you know what your credit score is?