How Do You Weigh In on the Credit Score Scale?

If you’re looking to purchase a new home, your credit score means a lot.

But do you know where you fall on the credit score scale?

Let us help you find out!

In this world, you won’t make it far without an established credit history. And if you’re one of the fortunate, you’ll maintain a satisfactory credit rating that’ll make life a lot easier to deal with.

But what is considered a good credit score? And what happens when you have a poor credit score? These are questions that are important to have the answers to. At least, if you want to finance cars, buy a home and/or get high-limit credit cards.

So knowing where you fall on the credit score scale is essential to securing your financial future as a borrower.

Now, let’s get into how to determine your creditworthiness.

What’s Considered “Good” On the Credit Score Scale?

Every person in the world has a credit report. And this credit report gathers your credit history and assigns you a three digit number. This number tells lenders your creditworthiness.

So obviously, the higher up on the scale the better. The credit score scale begins at 300 and goes up to 850. These ranges are then broken down into bad, poor, fair, good and excellent.

Here’s a quick break down:

  • Excellent: 750+
  • Good: 700-749
  • Fair: 650-699
  • Poor: 550-649
  • Bad: 549 and below

If you aren’t sure what your credit rating is, you can request a free credit report from all three credit bureaus: Equifax, TransUnion, and Experian.

Now, let’s dive a little deeper.

What’s a FICO Score?

FICO is an acronym for Fair Isaac Corporation, which represents the risk score created back in 1960.

It’s used as a way for financial industries to give customers access to credit. In the U.S., it’s still a popular method of scoring consumers.

The industry-specific credit score scale for FICO is from 250 to 900 versus 300 to 850 on the numerical FICO score scale.

In order to get a FICO score, you need at least one account that’s been open for six months or more and has been reported to a credit bureau within the past six months. If you happen to share an account with someone who’s passed away, then close the account and open another.

What’s annoying about the credit bureaus is that they don’t share data with one another. So it’s common for your credit rating to differ among the three.

How Your Credit Score is Determined

In your credit report, you may find both a FICO and VantageScore. Both use the same criteria to determine your rating on the credit score scale.

And it looks a little something like this:

  • Payment History: 35%
  • Credit Usage: 30%
  • Credit Age: 15%
  • Different Credit Types: 10%
  • Number of Inquiries: 10%

While both scores use the same criteria, different algorithms are implemented to calculate the score. VantageScore’s method makes their score more accurate for folks who have a thin file ( little to no credit).

This is because they collect data on your history of payments for utility bills, rent and cell phone bills.

So What’s the Highest FICO Score?

Theoretically, 850 is the highest FICO score you can get. However, you’re in the green once you’ve reached 800. At this point, approval is more likely for just about any type of financing.

You’ll also receive the best interest rates. Sometimes, this elite status awards you with free miles, trips, gifts, and tickets. So there are plenty of perks to go along with having an excellent credit rating.

Now, let’s look at how your credit score affects your financial life.

Getting a Bank Loan

You’re in the market for a loan. This can be for business or personal reasons. If you’re in the good section of the credit score scale, you’re in the clear.

In other words, you need at least a 740 credit rating to get good borrowing terms. This may include $0 down and 0% interest for the first year.

If you’re not in this range of the credit score scale and would like to buy a house, you can go for a rent to own contract. Or go with a first home buyers program.

These offer special terms that make it easier to get financing for your new home, even if you don’t have established credit.

Renting a Home

Now, your credit history isn’t just important for loans and credit cards. Your potential landlords will also dive into your credit report.

Some landlords require renters to have a certain credit rating. They also look for blemishes on your credit report, such as evictions, liens, outstanding judgments and unpaid utility bills.

Buying a New Car

Since the economic downturn of 2008, buying a car is easier. Dealers are more lenient about your credit rating, but this doesn’t mean you get the same terms as someone high on the credit score scale.

What this means is that you’ll end up with a higher monthly payment, higher interest rates, and a longer term. And you can expect your down payment to be much higher.

So if you’re working with a rating on the low end of the credit score scale, then you’re better off paying cash. Or purchasing from a buy-here-pay-here dealership. These are more lenient and have affordable terms.

Applying for a Business Loan

Normally, business and personal finance aren’t intertwined. But when it comes to applying for a business loan, lenders and banks will review your personal credit report.

Some creditors feel this indicates how well you handle your finances. Because if you’re able to keep your personal life in order, you’re very likely to do the same for your business.

Learn More About Credit and Debt

As a consumer, it’s important to empower yourself with financial knowledge. This way, you can begin making sound decisions that will stabilize your financial well-being.

If you’re just learning about the credit score scale and are looking to improve your rating, then visit Really Bad Credit Offers. Here, you can find financial tips and guides, as well as reviews for various financial services.

It’s a great start to becoming a more informed consumer. So stop by today to learn all you can about cleaning up your credit report.