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You looked up a credit score, but do you know what it means?
Knowing where you fall on a credit score range can be immensely helpful. It can help you predict whether you’ll qualify for a new loan or credit card, so it’s worth working to understand it all.
Understanding your credit scores
First off, you have more than one credit score. There are a few reasons for that.
There are different scores for specific products. For example, there are special auto and insurance credit scores. There are also different credit-scoring models, like FICO and VantageScore, which means you could have scores according to each model.
Lastly, there are multiple credit bureaus that provide credit reports on which scores are based. So depending on what information each bureau gets from individual lenders — and that can differ — the data used to compile your reports and build your scores could vary from bureau to bureau.
When you put it all together, that means that each individual could have multiple scores, and sometimes they don’t match.
Even though there are quite a few different scores out there, it’s worth knowing the general range that your scores fall into — especially since they can determine your access to certain financial products and the terms you’ll get.
FICO and VantageScore Solutions create the most widely used consumer credit scores and update their scoring models from time to time.
A guide to credit score ranges
Here’s what the ranges look like for VantageScore 3.0.
FICO has two main types of credit scores.
- Base FICO Scores — These predict the likelihood a consumer won’t make a payment as agreed on any type of account in the future, whether it’s a mortgage, credit card or student loan.
- Industry-specific FICO Score versions — These tailor credit scores for particular types of lenders, such as auto lenders or credit card issuers.
Here’s a look at FICO’s consumer scores.
And here’s the breakdown for FICO’s industry-specific scores.
Breaking down credit score ranges
There are common traits among different credit scores. For example, FICO and VantageScore use similar criteria for determining a score. Here are some of the important components in formulating your scores — though take note that these factors are not weighted equally.
- Payment history: This shows whether you pay your debts on time. Creditors prefer folks who pay on time, every time.
- Amount owed: This indicates how much debt you have in relation to your available credit. A good rule of thumb is to try to keep your credit use at 30% or below of your combined credit limits.
- Length of credit history: This is how long you’ve had open credit accounts. Generally, the older your accounts, the better.
- Credit mix: This makes up the different types of credit you have in your name. Creditors may want to see that you can handle various types of credit well.
- Recent applications for credit: Applying for credit can trigger a hard inquiry, which can lower your scores.
Lower scores indicate someone is riskier to the lender; in other words, they’re less likely to repay debt.
Here’s how your scores (either FICO or VantageScore) could affect your financial options.
Poor: 300 to low-600s
You might not be able to get approved for a loan or unsecured credit card at all. If a lender or issuer does approve an application, it likely won’t offer the best terms or lowest possible interest rate.
Fair to good: Low-600s to mid-700s
You’re more likely to get approved for financial products and may be able to shop around and compare options among different lenders. But you still might not get the best terms.
Very good and excellent: Above mid-700s
A lender could deny an application for another reason, such as having a high debt-to-income ratio, but those with top credit scores likely won’t have their applications denied because of their credit scores.
The applicants are also most likely to get offered a low interest rate and may have the most options when it comes to choosing repayment periods or other terms.
The same scores might mean different things
As you can see, different credit-scoring models may have different ranges and scoring criteria. That means the same credit score could represent something different depending on which credit model a lender uses.
A VantageScore 3.0® score of 661 could put you in the good range for example, while a 661 FICO® score may be considered fair.
And lenders create or use their own standards when making credit-based decisions. In other words, what one lender might consider “very good” another could consider “good.”
Even with all the variability, knowing where you generally fall on the credit score range can still be important. Your range could help you determine which financial products you’re eligible for and the terms a lender might offer you.
Sometimes, a few points can make a big difference
Slight day-to-day fluctuations in your credit scores are common and aren’t necessarily an indication that you’re doing something wrong. The difference between a few points might not even matter.
Say you have a credit score of 810, and you’re eligible for a lender’s best rates and terms. If your score increases to 815, it might not matter — it was already offering you the best deal.
But some lenders’ underwriting criteria require an applicant to meet a credit score threshold. In these cases, a rise or drop of a few points could make a big difference. That’s because if you don’t make the cutoff, your application could automatically get rejected.
Knowing where you stand in relation to a lender’s threshold or recommended credit range can help you find the financial products you’re eligible for and give you a goal if you’re working on building your credit.
Ultimately, lenders may set their own credit ranges and criteria for approving an application. But if you know where you stand on a credit score range, you can make educated guesses about your financial profile.
You’ll be able to better predict whether an application will be approved or if you’ll qualify for low interest rates or other favorable terms. If you use this knowledge while shopping for financial products, you may be able to avoid submitting unsuccessful applications.