Most people have at least heard the term “credit score” before, but many are still not clear on what it actually means. This post provides detailed explanation on what the numbers actually mean.
Once a person decides to check his/her credit score (you can easily do so with Credit Sesame), a number between 300-850 is revealed. This handy guide can walk you through the entire range of credit scores and help you to determine where you stand in the world of FICO credit.
580 or Lower: Poor
Credit scores below 580 are common for people who have regularly missed payments or for those who have very little or no credit history to report. This credit score is significantly below the national average, and therefore, most lenders will view scores in this range as a very risky bet. As a result, borrowers with a credit score of 580 or below are likely to get denied loans or face high interest rates if they do get approved.
Although a score between 580-669 is considered below average in the United States, it is still considered a fair score. Many lenders will still approve of loans to borrowers with a fair credit score, but it may be assigned to a relatively high interest rate. Scores in this range still signal some risk on the lender’s part, as these numbers can indicate a lack of credit history or some missed payments.
A credit score of 670-739 is considered either average or slightly above average in the United States. The vast majority of lenders will approve loans for people with these scores, and borrowers will be subjected to an average interest rate due to a perceived average risk to lenders.
People with credit scores in this range have room to increase their credit score by continuing to make payments on time, but even a couple of late bills can result in a significant drop. One can also improve their credit score at this time by opening new lines of credit and handling them responsibly, whether that’s a credit card, auto loan, or something else.
740-799: Very Good
After displaying a fairly long history of making payments on time, your score may get up into this range. Scores between 740 and 799 are considered very good, and lenders can usually feel confident that a borrower with a credit score like this will be quite dependable.
Credit scores in this range are higher than the national average, meaning that those with this score are likely to get better interest rates on loans than most. There is still room to increase your credit score, but anyone with a score within this range should feel great about their financial accomplishments.
800 or Higher: Exceptional
If your score is at 800 or above, this means that your score is significantly higher than the average credit score in the United States. A score of 800 or more signifies that you have a long history of making payments on time and have demonstrated financial responsibility time and time again.
For lenders, those with a credit score this high present an extremely low risk, and they are quite likely to receive a loan at a lower interest rate or be approved for a credit card with a score like this.
The Bottom Line
It takes years of hard work and responsible financial decisions and actions to build up one’s credit score, but it’s also important not to obsess or get too caught up in the score itself. Simply living your life, making payments on time, and maintaining a low credit utilization ratio will do wonders for helping your credit score over time.
For more detailed strategies on how to improve your credit score, check out my post to learn how you can raise your credit score by 200 points!
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