Knowing your credit score is important, but knowing your score is only the first step. You might not understand what that number means, but it is very important to understand why you have been given that number so you can either maintain or raise it.
You have more than one credit score
There are different credit scores that correlate to different products. Auto insurance has its own scoring method as compared to insurance credit scores, and there are different models including FICO and VantageScore.
Different credit bureaus actually provide different credit reports. That means that the data they use to compile your reports are going to be different depending on which bureau you obtain it from. This means that you will have more than one credit score and they might all be different, but it is important to know your average score and what it means.
Credit ranges
VantageScore grades credit based on the following ranges:
Poor: 300-600
Fair: 601-660
Good: 661-780
Excellent: 781-850
FICO has two different types of credit scores: Base FICO scores, and Industry-specific scores.
Base FICO scores are used to predict whether or not a consumer will make their payment on time. These might apply to a credit card, personal loan, student loan or even a mortgage. Base FICO scores are graded as such:
Poor: 300–579
Fair: 580–669
Good: 670–739
Very good: 740–799
Excellent: 800–850
Industry-specific scores are used by specific types of lenders such as an auto loan or a line of credit (credit card). They are graded by the following scores:
Poor: 250–579
Fair: 580–669
Good: 670–739
Very good: 740–799
Excellent: 800–900
What influences your score
There are a few traits that will specifically influence your credit score, regardless of the credit bureau or type of score.
- Payment history: This determines whether or not you pay your debts and bills on time. If you do pay them on time your score will reflect this and be higher.
- Credit usage: If you have less than 30% total usage of all your available credit, then this will reflect positively on your credit score.
- Length of credit history: The longer you have had open credit accounts the better your score will be.
- Different types of credit: If you only have credit cards as your lines of credit, your score will not be as high as someone who has different types of credit lines in your name. Creditors look to see that you can handle different forms of credit and reflect this on your score.
- Applications for loans or credit cards: Anytime you apply for a loan or line of credit this shows as a hard inquiry on your credit report.
How your credit score appears to lenders
Poor
You will struggle to be approved for any loan or unsecured credit card. If you are approved you will have the lowest possible interest rate.
Fair-Good
You have a better chance to be approved for loans or lines of credit. You might have more than one option when shopping for loans, but you may not get the best terms. For those with a “Fair” score on the lower end, you still may have trouble obtaining a rental apartment, but those with a “Good” score should have no problem.
Very good-Excellent
This is generally the best place to be in regards to credit scores. You should be able to easily shop around for loans and be accepted for most credit cards. The only time you may be denied is if you have a high amount of debt versus your income, but there is a very low chance you will be denied based upon your credit score.
Knowing your score
No matter your credit score, all lenders have their own criteria. You may be approved even if you do not have the best credit. Despite this, it is always best to understand your credit score and check it often, to ensure you know where you financially stand.
