Credit Score

Credit Scores chart from poor to excellent

What is a Good Credit Score?

A credit score is a 3-digit number that is determined by the status of your credit report. This score is used to represent the likelihood that a borrower will demonstrate good repayment behavior and is one of the critical factors that lenders use when determining whether a loan will be given or not.

Select a Topic:

What is A Good Credit Score?
How Credit Scores Are Determined
Different Types of Credit Scores
FICO Credit Score
Other Major Credit Scores
Why Good Credit Scores Matter
What Else do Lenders Look at Beside Credit Scores?

What is A Good Credit Score?

Credit Scores can range from 300-850, with anything below 450 being poor and anything above 750 being excellent. All scores tend to fall into one of these five categories:

  1. Bad Credit Score: 300-579
  2. Poor Credit Score: 580-669
  3. Fair Credit Score: 670-739
  4. Good Credit Score: 740-799
  5. Excellent Credit Score: 800-850

According to FICO, a borrower must maintain a score of 740 or higher to achieve “good credit score” status. But what is considered to be a “good” or “poor” credit score changes from company to company.

How Credit Scores Are Determined

Many factors comprise the value of a credit score such as: payment history, amount of debt owed, length of credit history, new credit, and the different types of credit used by the borrower.

Credit Score Factors

Different Types of Credit Scores

Although there is not a single “standard” for how credit scores are measured, the principles in which the different types of credit scores are built upon are generally similar. Here are the 5 of the most common types of credit score profiles and the ranges they use:

  • FICO: 300 – 850
  • Equifax: 300-850
  • Experian: 330-830
  • Transunion: 300-850
  • VantageScore: 501-990 (A – F letter grading)

FICO Credit Score

FICO scores are the most prominent type of credit score used by lenders today. They have the longest standing & most widely recognized platform for tracking credit.

Other Major Credit Scores

Equifax, Experian, and TransUnion are the three major credit bureaus in the United States. Each maintains their own version of credit records for nearly anyone who uses credit in the US.

Although all three credit bureaus may have access to the same information about your credit profile, they may weigh the same factors differently, meaning, you could have a different score from all 3 major credit bureaus.

Your credit score can vary by the: provider, the model used to determine a score (weighting), and industry.

Why Good Credit Scores Matter

Your personal credit score can have significant effects on every aspect of your financial life. A better score will make it easier to be approved for loans, get higher amounts of credit when needed, and allow for lower interest rates from lenders as they trust you more as a borrower.

Even minor differences in credit score can have significant implications. For a 30-year mortgage loan at a fixed rate, these are some of the example differences that a borrower could see with different scores.

FICO Credit Score Interest Rate Monthly Mortgage Payment
760-850 4.66% $1,561
700-759 4.88% $1,599
680-699 5.05% $1,638
660-679 5.27% $1,665
640-659 5.79% $1,746
620-639 6.46% $1,853

With a credit score of 760 or more, a borrower would pay close to $260,000 in interest throughout the lifetime of this mortgage loan. A borrower with a score of 620 would pay closer to $375,000 throughout the lifetime of the same loan.

A 140-point difference in credit score could result in having to pay an additional $115,000 in interest over 30 years for the same mortgage loan.

Your credit score profile does not take your income level, $ amount in savings, or job security into account. So, a lender may also check to see how much you earn & the total amount of assets you have accumulated in addition to your credit score when determining your creditworthiness.

What Else do Lenders Look at Beside Credit Scores?

Lenders don’t only focus on your credit scores, even though that is one critical factor when they loan you money. There are other factors that lenders look at that include:

  1. Credit history
  2. How much debt you currently have
  3. Your income
  4. Assets you own
  5. Cash flow and liquidity
  6. Employment History
  7. Length of time at your current residence
  8. College Degree
  9. Professional Licenses (Doctor, Lawyer, Licensed Technician, )
  10. How often you change your contact phone number

If you perform well in these areas, then you will have a higher chance of getting a loan.

Learn More About Credit & Debt at Debt Settlement Review

At Debt Settlement Review, we provide up-to-date information for many topics across the various financial industries. Browse the navigation above to read more about credit scores, types of debt, and our reviews of the companies that offer debt relief to consumers across the world.

Get Help Now

 

Need Help?

We hope our research has helped you make the right choice, but no company is a perfect fit for everybody. IT PAYS TO SHOP!Get a FREE analysis of your debt today.