FICO scores were developed in 1958 by Fair Isaac Corporation – an Analytics company in the United States. A credit score is a number, based on a consumers credit report, which represents the creditworthiness of an individual, or the probability that the person will pay his or her debts. Meaning, the higher your credit score is the better the chances are that you will be able to repay, on time, your car payments, credit card payments, a mortgage, loans, Insurance etc’.
Ranges and Their Meaning
An Excellent Credit Score: 800 and Higher
With a credit score in this range no lender or financial institution will ever disapprove your loan application. In addition, to the low interest rates you’re quoted, the APR (Annual Percentage Rate) on your credit cards will be the lowest as possible. In other words: “you’ll be treated as royalty”. Achieving excellent credit ratings not only requires financial discipline and knowledge, but also a good credit history. Generally speaking it means that you must use a substantial amount of credit on an ongoing monthly basis and repay it ahead of time.
A Very Good Credit Score: 700 – 799
A great range to be in. It is achievable and actually 27% of the United States population belongs to this credit score range.
Being in this range of credit scores you are bound to get good rates and approved for any type of credit loan or personal loan, whether unsecured or secured.
A Good Credit Score: 680 – 699
Approvals are virtually guaranteed but interest rates come in to play. It is nothing drastic, don’t worry. If you’re not in a rush and thinking about a long term loan such as a mortgage, try nudging your credit score higher than 720 and it will be well worth your while – your long term savings will be noticeable. This is pretty much the average credit score.
An OK or Fair Credit Score: 620 -679
Depending on the type of loan and your credit history, you might find that the rates you are quoted aren’t best. That doesn’t mean that you won’t be approved but, certain restrictions will apply to the loan’s terms. Download the fix my credit score guide for more information and advice on how to improve your credit.
A Poor Credit Score: 580 – 619
With credit ratings in this range you can still get an unsecured personal loan and even a mortgage, but, the terms and interest rates won’t be pretty. You’ll need to pay more over a longer period of time because of the high interest rates.
You need to start paying attention to your budgeting and finances. Start by reading this guide.
A Bad Credit Score: 500 – 579
You can get a loan but nothing even close to what you expect it to be. Some people with bad credit apply for loans to consolidate debt in search for a fresh start. If you decide to do that then do it wisely.
With a 500 credit score you need to make sure that you don’t default on payments or you’ll be making your situation worse and might head towards bankruptcy, that’s not what you want. It is strongly recommended that you repair your credit as soon as possible.
A Very Bad Credit Score: 499 and Lower
You need serious and professional help with your credit. You are making too many credit mistakes and they will only get worse if you don’t take positive action. Consider contacting a credit counseling agency for help.
If you are thinking of a loan then keep in mind that if you find a sub-prime lender, the rates will be very high and the terms will be very strict. I recommend you fix your credit and only then move on to applying for a loan.
The Credit Score Pie Chart: What Range Do You Belong To?
Now that you’ve read the information above and you understand more about FICO credit scores and their ranges, it is time to take this one step forward and let you compare yourself to the rest of the nation…
To view the chart, simply click on the image. It opens in the same window.