Credit Score ScalePosted on September 3rd, 2010 William No comments
As we've mentioned, you're entitled to a free credit report from each of the major credit agencies once per year, and can obtain your credit scores as well for a small fee. But what does that score mean? It helps to have an idea of that what credit score range looks like so you can get an idea of how your credit stands up.
The credit score scale ranges from 300 through 850; while your score will likely be slightly different at each of the three credit bureaus due to differences in how they calculate it, they should be fairly close to each other.
850 is a perfect credit score; this is the highest credit score possible, and is extremely rare. However, anything over 800 is excellent credit; if your credit score is over 800, you should expect to have little to no trouble getting the best rates available. A good credit score is anything over 720, so as long as you're in the 720-850 range, you have little reason to worry about your credit.
Next down on the scale is scores higher than 680, but below 720. In this credit range, you still should have an easy time getting loans, but you'll likely pay more than someone at the top of the scale. You're pretty close to having your credit where you want it to be, so keep paying your debts on time, get your credit utilization down, and pretty soon you should make it to the top of the credit card chart.
A credit score between 641 and 680 is effectively a "C" grade; you're not failing, but you're not doing that great, either. You can get loans, but you'll pay considerably more than people who are higher up on the credit score scale.
A 600 credit score is about the lowest you can go and still be able to qualify for a mortgage. Many people are down in the 600-640 range; in fact, the average credit score range is only 650-699, so if your score is between 600 and 640, you're only slightly below average. Still, when taking out a standard loan (that is, one not specifically intended for those with bad credit), you can expect to pay the institution's highest interest rate.
A credit score under 600 is bad, and marks you as being a bad credit risk. It's best to avoid getting down into this range if at all possible, as raising your credit score is best done by showing that you can use credit responsibly, but when your credit rating it under 600 you'll have a hard time getting any credit in the first place! A credit score under 600 is pretty much the definition of bad credit; statistics show that people in this range are very likely to default on a loan, so it will be very difficult to get credit and, if you do, the interest rate will be extremely high. You're very unlikely to be able to get a large loan, such as a mortgage.
To summarize: it's worth putting in effort to stay in the top two ranges on the credit scale so you can get the best rates, but it's even more important to stay out of the lowest range if you ever want to use credit again. Remember: if all else fails, negative information about your credit will fall off your credit report after a certain number of years, so just keep paying your bills on time and wait for it to get better.