Credit Scores Explained

Ranges vary depending on the credit scoring model, but generally, credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and higher are considered excellent.

credit scores explained

A credit score ranges from 300 to 850 and is a numerical rating that measures a person's likelihood to repay a debt. A higher credit score signals that a borrower is lower risk and more likely to make on-time payments. Credit scores are often used to help determine the likelihood someone will pay what they owe on debts such as loans, mortgages, credit cards, rent and utilities. Lenders may use credit scores to evaluate loan qualification, credit limit and interest rate.

In part, this depends on the types of borrowers they want to attract. Creditors may also take into account how current events could impact consumers' credit scores, and adjust their requirements accordingly. Some lenders create their own custom credit scoring programs, but the two most commonly used credit scoring models are the ones developed by FICO and VantageScore.

FICO creates different types of consumer credit scores. There are "base" FICO Scores that the company makes for lenders in multiple industries to use, as well as industry-specific credit scores for credit card issuers and auto lenders.

FICO industry-specific scores are built on top of a base FICO Score, and FICO periodically releases new suites of scores. The FICO Score 10 Suite, for instance, was announced in early 2020. It includes a base FICO Score 10, a FICO Score 10 T (which includes trended data) and new industry-specific scores.

There are scores used more rarely as well. For instance, FICO is slowly rolling out the UltraFICO Score, which allows consumers to link checking, savings or money market accounts and considers banking activity. Lenders may also create custom credit scoring models designed with their target customers in mind.

As a result, the same factors can impact all your credit scores. If you monitor multiple credit scores, you could find that your scores vary depending on the scoring model and which one of your credit reports it analyzes. But, over time, you may see they all tend to rise and fall together.

Your credit reports (but not consumer credit scores) can also impact you in other ways. Some employers may review your credit reports before making a hiring or promotion decision. And, in most states, insurance companies may use credit-based insurance scores to help determine your premiums for auto, home and life insurance.

Checking your credit scores might also give you insight into what you can do to improve them. For example, when you check your FICO Score 8 from Experian for free, you can also look to see how you're doing with each of the credit score categories.

But some actions might have an impact on your credit scores that you didn't expect. Paying off a loan, for example, might lead to a drop in your scores, even though it's a positive action in terms of responsible money management. This could be because it was the only open installment account you had on your credit report or the only loan with a low balance. After paying off the loan, you may be left without a mix of open installment and revolving accounts, or with only high-balance loans.

Your bank, credit union, lender or credit card issuer may give you free access to one of your credit scores. Experian also lets you check your FICO Score 8 based on your Experian credit report for free.

The type of credit score you get can depend on the source. Some services may offer you a version of your FICO Score, while others offer VantageScore credit scores. In either case, the calculated score will also depend on which credit report the scoring model analyzes.

A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time. Creditors and lenders consider your credit scores as one factor when deciding whether to approve you for a new account. Your credit scores may also impact the interest rate and other terms on any loan or other credit account for which you qualify.

Your credit scores may vary depending on the scoring model used to calculate them as well as the information on the respective credit report. However, most credit scoring models consider the same factors:

Why is it important to strive for a higher credit score? Simply put, borrowers with higher credit scores generally receive more favorable credit terms, which may translate into lower payments and less interest paid over the life of the account.

Credit scores may also vary according to the scoring model used and which CRA furnishes the credit report. That's because not all creditors report to all three nationwide CRAs. Some may report to only two, one or none at all. In addition, lenders may use a blended credit score from the three nationwide CRAs.

A credit score is just a three-digit number, but it can have a significant impact on your financial life. Your credit scores (most people have more than one) can affect your ability to qualify for a loan or get a credit card by giving potential lenders a sense of how likely you are to repay your debts. Understanding credit score ranges can help you assess whether your credit may need some work. And knowing the factors that affect your credit scores can help you identify how to improve them over time.

A credit score is a number based on the information in your credit reports. Most credit scores range from 300 to 850, and where your score falls in this range represents your perceived credit risk. In other words, it tells potential lenders how likely you are to pay back what you borrow.

There are a few key differences between the VantageScore and FICO models, including how they weigh different factors in determining your scores. Both have a score range of 300 to 850, but they differ as to which ranges are considered poor, fair, good or excellent.

A credit score that falls in the good to excellent range can be a game-changer. While financial institutions look at a variety of factors when considering a loan or credit application, higher credit scores generally correlate with a higher likelihood of getting approved.

A good credit score can also unlock the door to lower interest rates and more-competitive terms. And if you have excellent credit scores, you have an even better chance of being offered the best rates and terms available.

On the other hand, if you have poor or bad credit scores, you may be able to get approved by some lenders, but your rates will likely be much higher than if you had good credit. You may also be required to make a down payment on a loan or get a cosigner.

Remember that most people have a number of different credit scores. The scores you see on Credit Karma may not be the exact scores a lender uses when considering your application. Rather than focus on your exact scores (which change often), consider your scores on Credit Karma a general measure of your credit health.

Getting an 850 credit score is possible, but uncommon. Only about 1% of all FICO scores in the United States are 850, according to Experian. Those with credit scores of 850 generally have a low credit utilization rate, no late payments on their credit reports and a longer credit history.

No one credit score holds more weight than the others. Different lenders use different credit scores. Regardless of the score used, making on-time payments, limiting new credit applications, maintaining a mix of credit cards and loans, and minimizing debt can help keep your credit in good shape.

Generally speaking, a credit score is a three-digit number ranging from 300 to 850. Credit scores are calculated using information in your credit report, including your payment history; the amount of debt you have; and the length of your credit history.

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent. Higher credit scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit.

Different lenders have different criteria when it comes to granting credit, which may include information such as your income or other factors. That means the credit scores they accept may vary depending on that criteria.

Credit scores may differ between the three major credit bureaus (Equifax, Experian and TransUnion) as not all creditors and lenders report to all three. Many creditors do report to all three, but you may have an account with a creditor that only reports to one, two or none at all. In addition, there are many different scoring models available, and those scoring models may differ depending on the type of loan and lenders' preference for certain criteria.

Your FICO Scores are unique, just like you. They are calculated based on the five categories referenced above, but for some people, the importance of these categories can be different. For example, scores for people who have not been using credit long will be calculated differently than those with a longer credit history.

The next step is to get a feel for the recipes used to turn credit-report info into credit scores. Below, you can see how the two most popular types of scores weigh the various ingredients. Other types of credit scores may be calculated a bit differently, but they will likely produce very similar results.

People often overcomplicate things when thinking about credit scores. So to help simplify things in your mind, we posed the following questions to a panel of personal finance experts. You can see who they are and what they said below.

Credit scores are calculated by the major credit bureaus: Experian, Equifax, and TransUnion. The bureaus compile the contents of your credit report and use algorithms from companies like FICO and VantageScore to calculate your credit score. 041b061a72