Credit score ranges what do they mean?

Credit score ranges: What do they mean?

Calculated with a formula based on variables such as payment history, length of credit and amount owed, your credit score can affect the interest rate you pay to a lender and even the difference between a loan being approved or rejected. Read on to learn a few credit score basics, and what scores in a variety of areas can mean for your future borrowing needs.

Credit Score Basics

Your credit score is a number that represents a lender's risk when you borrow money. A FICO score is a well-known credit score created by Fair Isaac Corporation and used by credit bureaus to indicate a borrower's risk. Another credit score is the VantageScore, which was developed through a partnership between three credit unions, Equifax, Transunion and Experian.

Your credit score calculation represents your credit risk at a given point in time, based on the information in your credit report. FICO scores range from 300 to 850, while Vantage scores range from 501 to 990. In both cases, the higher the credit score, the lower the risk for the lender. FICO scores are used for the purpose of this article.

Excellent credit score – 720 to 850

Borrowers with a credit score in the 720 to 850 range are considered consistently responsible when it comes to managing their borrowing, and are prime candidates to get the lowest loan rates. Have a long history of late payments as well as low balances on credit products. Consumers with excellent credit scores can get lower interest rates on mortgages, loans and lines of credit because they have a low risk of defaulting on their credit contracts.

Good credit rating – 690 to 720

A credit score between 690 and 720 indicates that a consumer is generally financially responsible when it comes to managing money and credit. Most of their payments, including loans, credit cards, utilities, and rent payments are made on time. Credit card balances are relatively low compared to their credit account limits.

Problem Credit Score – 650 to 690

Borrowers with credit scores between 650 and 690 have a damaged credit history. You often have a credit record that shows multiple late payments to more than one lender, and may even show a credit default. Borrowers with problem credit scores are likely to be rejected for future loans because they pose a high risk of not making payments on time and in full.

Poor Credit Score – 350 to 650

A person with a score between 350 and 650 has a significantly damaged credit history. This may be the result of multiple defaults on different loan products from different lenders. However, a bad score can also be the result of insolvency, which will stay in your lending business for up to 10 years.Borrowers with credit scores that fall into this range have very low chances of obtaining new loans. If your score falls in this range, talk to a financial professional about steps you need to take to repair your credit.

No credit – 0 to 349

Everyone has to start somewhere! If your credit score is between 0 to 349, chances are you have not yet established a credit score and have no credit history. Talk to your local lender about their credit requirements. If you're approved for your first loan or credit card, immediately set up a responsible repayment pattern to establish a good credit record. If you have a credit history and your score has fallen into this range, drastic steps will likely be necessary.

The Bottom Line

Paying your bills on time and completely consistently will help you damage your credit score. Your credit score is based on a variety of factors and can be used to determine whether you will qualify to borrow money as well as the terms (including interest rate) of the loan. Scores between 720 and 850 are excellent, indicating that borrowers have a long history of using credit responsibly. Scores between 690 and 720 are good and show that the borrower has made most of their payments on time and in full. A score between 650 and 690 may indicate a damaged credit history, possibly due to a loan default. Scores that fall in the 350 to 650 range indicate a significantly damaged credit history, often from more than one bad loan or even bankruptcy. Scores below 349 are a sign that the applicant does not yet have a credit history.