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You already know that it’s important to earn good credit. What you might not understand clearly, however, is what “good credit” means in terms of the numbers.
At what point does fair credit end and good credit begin? What score is classified as excellent credit?
The answers to those questions, and many others dealing with credit score ranges, depend upon many different factors. Keep reading for a breakdown that should be helpful.
There’s no such thing as “the” credit score range. You have not one, not three, but actually hundreds of different credit scores based on your credit history.
The reason there are so many credit scores available commercially is because scores come in many shapes and sizes. There are different brands of credit scores, different types of scores created by those brands for different purposes, and different generations of credit scores as well. Not only that, each credit reporting agency has a unique file of your credit accounts, each with the ability to generate a different credit score based upon your data.
Most people will tell you that credit scores range from 300–850. And while that is certainly the most popular credit score range, it’s not the only possibility.
When you apply for new credit, lenders use credit scores to predict your level of credit risk.
If you want to figure out what is considered an excellent credit score by a lender, you’ll need to know the following:
You can ask your lender which specific credit report it will pull and and which credit score it will use for your application. Still, deciphering that information can be complicated. Here’s the main point to remember: With any scoring model, the higher your score falls on the scale, the better.
If your lender is using a generic score (300–850), here are two credit score range charts that provide insight into how those numbers fall on a scale of very poor, through average credit, and up to exceptional.
|Base FICO Score Ranges|
|Rating||Range||Percentage of People*|
|Rating||Range||Percentage of People*|
*These data are from Experian.
Curious about the factors that make up your credit scores? Here’s a helpful guide.
Generic credit scores are designed to predict the likelihood that you’ll become 90 days late on a credit obligation within the next 24 months.
As mentioned above, credit scores come in multiple brands, types (or categories), and generations. Here’s a overview of how it works.
Credit scores are complex mathematical algorithms sold to lenders in the form of software. However, it might help for you to think of a credit score like a tangible product you can touch, such as a mobile phone or tablet. Just like multiple brands create mobile devices (think Apple and Samsung), there are multiple brands which create credit scores.
The two most common brands of credit scores used by lenders in the United States are created by Fair Isaac Corporation (also called FICO) and VantageScore Solutions. These two companies develop the scoring software which most lenders use to predict the risk of doing business with you.
Ultimately, it’s up to each lender to choose which credit scoring brand it prefers. In the present lending environment, FICO is king. According to FICO, its scores are used in 90% of U.S. lending decisions. In fact, FICO is so well known that people often refer to a “FICO Score” and a “credit score” as if they were one and the same (kind of like how people will call a tissue a Kleenex).
VantageScore credit scores are more dominant in the consumer credit score marketplace – the landscape of options for consumers to check their own credit scores. For example, if you check your free credit score online or sign up for a credit monitoring service, there’s a good chance you’ll be viewing some version of a VantageScore.
Yet you shouldn’t assume that lenders don’t use VantageScore credit scores as well. VantageScore reports that over 63 million of its credit scores were used by financial institutions between July of 2017 and June of 2018.
A 2019 Credit Card Insider survey concerning credit score myths and misconceptions revealed that 70% of Americans had never even heard of VantageScore, despite these scores being some of the most prominent in the credit industry.
Going back to the mobile device analogy, Apple and Samsung don’t sell merely a single product. Rather, each company sells multiple types of mobile devices (e.g. iPhone, iPad, Galaxy Fold, Galaxy S, etc.).
Credit scores work the same way. Fair Isaac Corporation sells a variety of credit scoring models including:
VantageScore, on the other hand, creates a single, generic (aka non-industry-specific) scoring model.
The base FICO credit score range is 300–850. However, FICO Auto and Bankcard Scores were designed with a range of 250–900. VantageScore ranges can vary as well, but that is based upon the version a lender uses (more on that below).
With all FICO and VantageScore models, a higher score signifies that you’re a lower risk borrower. Risky activity like late payments and high credit utilization will generally lower your scores.
Let’s use the mobile device analogy one more time. Apple and Samsung didn’t create the first iPhone and Galaxy phones and stop. Instead, both companies create and release newer and better versions of their products to sell to the public all the time.
Once again, credit scores work the same. FICO and VantageScore are constantly developing new and improved scoring models (think 1.0, 2.0, 3.0, etc.).
Lenders began using FICO Scores in 1989. Since then, FICO has updated its model (including generic scores and industry-specific options) numerous times.
VantageScore has been around since 2006. Earlier versions of VantageScore used a range of 501–990. The more familiar score range of 300–850 was adopted beginning with VantageScore 3.0 in 2013.
When your credit score climbs the scale into a higher category, you can expect better treatment from lenders, like credit card companies and banks. Better treatment can translate to a lower interest rate, better terms on financing, a higher credit limit, and often a lower down payment requirement (or perhaps no down payment at all).
As you can see above, you don’t need the highest possible credit scores to receive the best treatment from lenders. You simply need a credit score which falls into the exceptional or excellent credit score range.
Of course, your credit scores effect more than just the prices you’re charged for financing. It can determine your ability to qualify for a loan or credit card at all.
When you apply for a credit card product, for example, the lender may have a minimum credit score requirement that you’ll need to meet to qualify for a new account. (Tip: If you’re struggling with credit problems, a secured credit card could potentially help you reestablish some positive payment history.)
Approval cutoff ranges can vary widely from lender to lender. However, knowing your credit scores (and where they fall on the scales above) can be helpful. When you know your credit score range, you can determine which credit cards or loans you’re likely to qualify for and which ones you probably shouldn’t fill out an application for yet.
If you’re in the market for a new credit card you can also check to see if you’re pre-approved for any credit cards, which is another good way to see what you can qualify for before applying.
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