Exceptional Credit Score: 800 To 850
Consumers with a credit score in the range of 740 to 850 are considered consistently responsible when it comes to managing their borrowing and are prime candidates to qualify for the lowest interest rates. However, the best scores are in the range of 800 to 850.
People with this score have a long history of no late payments, as well as low balances on credit cards. Consumers with excellent credit scores may receive lower interest rates on mortgages, credit cards, loans, and lines of credit, because they are deemed to be at low risk for defaulting on their agreements. Having an excellent credit score is particularly useful for qualifying for a personal loan, as it typically more than makes up for a lack of collateral.
Sometimes A Few Points Can Make A Big Difference
Slight day-to-day fluctuations in your credit scores are common and arent necessarily an indication that youre doing something wrong. The difference between a few points might not even matter.
Say you have a credit score of 810, and youre eligible for a lenders best rates and terms. If your score increases to 815, it might not matter the lender was already offering you the best deal.
But some lenders underwriting criteria require an applicant to meet a credit score threshold. In these cases, a rise or drop of a few points could make a big difference. So if you dont make the cutoff, your application could automatically get rejected.
Knowing where you stand in relation to a lenders threshold or recommended credit range can help you find the financial products youre eligible for and give you a goal if youre working on building your credit.
Why Is A Good Credit Score Valuable
Now you know a little more about where scores come from. But that doesnât explain why good credit scores are so valuable. Credit scores are often associated with credit risk, credit cards, loan applications and other lending decisions. And having a good score could help you qualify for more financial products with better rates, terms and credit limits.
But the influence of credit scores goes beyond that. And even when youâre not borrowing money, good credit could help you. Good scores could lead to lower insurance rates and fewer and lower security deposits on things like telecom and utility accounts. And good scores may make it easier to rent a home, too. Your credit reportsâbut not your scoresâcould even impact some job prospects.
Pre-Approval, Pre-Qualification and Comparing Offers
For starters, you may be pre-approved or pre-qualified for more credit offers if you have good credit scores. That may allow you to compare offers and find the best fit for your situationâwhether youâre looking at mortgages, credit cards or auto loans. But if youâre shopping around, be sure to understand how can affect your credit scores.
Interest Rates and Credit Limits
Beyond Credit Cards and Loans
Good credit could affect other parts of your life, too:
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What A Fair Credit Score Means For You:
Borrowers within the “fair” credit score may push interest rates higher for their lines of credit. Borrowers in this range may incur higher charges associated with a loan or line of credit. It may be difficult to obtain a 30-year mortgage at the lower end of this range and you may expect higher interest rates. Auto loan APRs may have higher rates and credit cards may have lower limits and higher APRs.
Your Score Reflects A Mix Of Different Factors
There are generally five different variables taken into account when calculating your credit score, ‘s editorial director Kali Geldis said, including payment history, your debt load, your age, your mix of credit, and how often you apply to refinance or add new cards. These can have a pretty big impact, especially over time.
The longer your positive credit history is, the more likely your score will improve on its own.
” probably not going to think about buying a house until they’re in their 30s, by which time it’s too late to suddenly improve your credit score,” Robert Harrow, a credit card expert at ValuePenguin, said. “This is something that takes time to build, so if you want low interest rates on your mortgage, for example, you need to start thinking about this now.”
And remember, credit card debt is not the only kind of debt included in your score.
“Have you been able to actively manage … student loans and auto payments along with credit cards?” Geldis said. “Lenders want to see you have a good and varied history. It’s a good predictor for the lender that you’ll be able to handle their loan.”
Be careful and strategic when taking on new debt: Applying to lots of different loans makes it look like you’re in financial hot water.
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What Affects Your Credit Scores
Common factors can affect all your credit scores, and these are often split into five categories:
- Payment history: Making on-time payments on your credit accounts can help your scores. But missing payments, having an account sent to collections or filing bankruptcy could hurt your scores.
- : How many of your accounts have balances, how much you owe and the portion of your credit limit that you’re using on revolving accounts all come into play here.
- Length of credit history: This category includes the average age of all your credit accounts, along with the age of your oldest and newest accounts.
- Types of accounts: Also called “credit mix,” this considers whether you’re managing both installment accounts and revolving accounts . Showing that you can manage both types of accounts responsibly generally helps your scores.
- Recent activity: This considers whether you’ve recently applied for or opened new accounts.
FICO® and VantageScore take different approaches to explaining the relative importance of the categories.
What Is A Good Credit Score For A Mortgage
Your credit score arguably matters more on a mortgage application than with any other type of personal financing. With a mortgage, a good credit score might save you thousands of dollars in interest every year.
For example, say you have a FICO credit score around 640 when you apply for a $350,000 mortgage. FICOs Loan Savings Calculator estimated that in June 2020, your APR would be around 3.957% on a 30-year, fixed-rate loan. Your monthly payment would be $1,662, and youd pay $248,424 in interest over the life of your loan.
Now, imagine you work to improve your FICO Score to 680. With the higher score, you might qualify for an APR of 3.313%. Based on the lower rate, your monthly payment would be $1,535 for the same home. You would pay $202,726 in interest over your 30-year loan term. Because you improved your credit score from fair to good, you would save:
- $1,524 per year
- $45,698 over the life of the loan
If youre aiming to qualify for a mortgage lenders lowest rates, that generally falls under a FICO Score of 760 or higher. Of course, getting a great mortgage rate requires more than just a brag-worthy credit score. But the three-digit numbers sold alongside your credit reports are a key factor that mortgage lenders consider when you apply for financing.
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Student Loan Balance Growth Slows
Student loan balances typically grow by a steady 4% to 6% annually, and are a much less volatile measure of household debt than other loan types. While the average student loan borrower owes $39,487, that balance grew just 1.8% from Q3 2020 through Q3 2021. Paused interest accrual on existing student loans, which was in force throughout the 12-month period, kept a lid on much of the increaseeven as a record number of borrowers entered forbearance plans and temporarily stopped making payments.
How To Improve A Bad Credit Score
There are many ways to improve your credit score. Ultimately, it comes down to taking strategic action and consistently making strong financial decisions. Here are four steps you can take to improve your credit profile.
- Check your credit reports: Start by getting a free credit report and score from each of the three major credit bureaus at AnnualCreditReport.com. Dispute any errors and identify the negative information bringing down your score so you know where to focus your credit repair efforts.
- Avoid late payments: Since payment history makes up 35 percent of your credit score, paying your bills on time is one of the best ways to build and maintain strong credit. Consider setting up autopayments on your accounts to prevent late payments.
- Lower your credit utilization ratio: Your credit utilization ratio accounts for 30 percent of your FICO score. A common rule of thumb is to keep your balances below 30 percent of your credit limit, while the highest credit score achievers use less than 10 percent of their available credit.
- Become an authorized user: If your credit history is thin or you just want to improve your payment history, consider asking a friend or relative to add you as an on their credit card account. Assure the person helping you that you dont even have to use the card or even know their account number. This strategy can be beneficial if the person you ask has an account with a high credit limit, low credit utilization and a strong history of timely payments.
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What Is A Good Credit Score
A credit score is a three-digit number that is calculated from information on a credit report and generally ranges between 300 and 850. A good credit score is 670 to 739 on the FICO® Score range, while a credit score of 661 to 780 is good on the VantageScore® range.
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A credit score ranges from 300 to 850 and is a numerical rating that measures a person’s likelihood to repay a debt. A higher credit score signals that a borrower is lower risk and more likely to make on-time payments. Credit scores are often used to help determine the likelihood someone will pay what they owe on debts such as loans, mortgages, credit cards, rent and utilities. Lenders may use credit scores to evaluate loan qualification, credit limit and interest rate.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2021, the average FICO® Score in the U.S. reached 714an increase of four points from the previous year. Higher scores can make creditors more confident that you will repay your future debts as agreed. But creditors may also set their own definitions for what they consider to be good or bad credit scores when evaluating consumers for loans and credit cards.
Regularly Read Your Reports
Since your credit score is based off of the information in your credit report, take time to review your reports regularly. You want to be sure everything is an accurate, true reflection of your financial story. As you become more comfortable reading and understanding the data in your report, the easier it is to identify which information is potentially causing changes in your credit score.
To help you understand your credit report, weve created an interactive guide that breaks down each section and explains how the information may impact your credit score.
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Fair And Bad Credit Scores
All credit scores begin at the base level of 300. You cant have a score thats below that range.
That said, you have poor or bad credit with a score that falls anywhere from 300-690. Most lenders who see this type of score range will consider you to be risky to lend to.
That means lenders may not be willing to work with you. Those that will work with you may charge you significant interest and fees. At this range, youre missing out on financial opportunities. You may not get extended a line of credit when you need it most.
What An Excellent/exceptional Credit Score Means For You:
Borrowers with exceptional credit are likely to gain approval for almost any credit card. People with excellent/exceptional credit scores are typically offered lower interest rates. Similar to “exceptional/excellent” a “very good” credit score could earn you similar interest rates and easy approvals on most kinds of credit cards.
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Whats A Good Credit Score Range
A good credit-score range depends on where a score comes from, who calculates the credit score and whoâs judging it. Itâs important to remember that lenders set their own and standards to determine . That means that what FICO, VantageScore or anyone else considers good may not be the same.
However, there are some general guidelines for how being within a score range can impact your choices:
- A poor to fair score means you may find it difficult to qualify for many credit cards or loans. You might need to start with a secured credit card or credit-builder loan to build or rebuild your credit. And if you do qualify for an account, you may have to pay high fees and interest rates if you don’t pay your balance in full each month.
- A fair to good score means you may be able to qualify for more options, but you wonât necessarily receive the best rates or terms. You also might find you can qualify for a traditional unsecured but have a harder time qualifying for a premium card.
- A very good or excellent score means you may be able to qualify for the best products with the lowest advertised rates. While creditors consider other factors too when determining your eligibility and rates, your credit score probably wonât be holding you back.
Whatâs a Good FICO Credit Score Range?
FICO scores that range between 670 and 739 qualify as good scores. Scores in that range are near or slightly above the U.S. average. In total, FICO breaks its scores into five categories:
What Is A Good Credit Score For My Age
Your age doesnât directly influence your credit scores. But as FICO and VantageScore show, the age of your credit accounts is one factor that affects how scores are calculated.
That could be one reason peopleâs credit scores tend to increase as they get olderâtheir accounts have simply been open longer. But credit scores can rise or fall no matter how old you are. And having good credit scores comes down to more than just the age of your accounts.
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What Affects My Credit Scores
It’s important to understand the factors that go into determining your credit scores so you know how to improve them if necessary. For the FICO® Score, the credit score version you will receive through Experian, there are five main factors that impact your score. They are all weighted differently:
When you receive your credit score, you should also get some guidelines on your score profile and why your score ranks where it does. This will include information on what’s hurting it and what’s helping your score, as in the image below:
These guidelines will help you figure out what you need to do to maintain a good FICO® Score, and what you need to do to improve it. For example, if bad payment history is one of the reasons your FICO® Score is on the lower side, you should focus on paying your bills on time. Consider automating your payments so you never miss them again.
Check Your Credit Report For Errors
Carefully review your credit report from all three credit reporting agencies for any incorrect information. Dispute inaccurate or missing information by contacting the credit reporting agency and your lender. Read more about disputing errors on your credit report.
Remember: checking your own credit report or FICO Score has no impact on your credit score.
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Improve Your Credit Score Today
Now you understand the effects of good credit vs bad credit! If you have bad credit, its best to improve your credit score before you get out those moving boxes, take that nice car for a test drive, or make another large purchase.
Go Clean Credit is a company that helps individuals understand the difference between good credit vs bad credit and improve their poor credit scores. Contact them today for more information about how you can improve your score before you commit to a loan with bad rates!
What A Very Poor Credit Score Means For You:
Most of the major banks and lenders will not do business with borrowers in the “very poor” credit score range. You will need to seek out lenders that specialize in offering loans or credit to subprime borrowers andbecause of the risk that lenders take when offering credit to borrowers in this rangeyou can expect low limits, high interest rates, and steep penalties and fees if payments are late or missed.
In this “very poor” credit score range, 30-year mortgages may not even be possible, auto loans can have high interest rates and only a select few credit cards may be made available. A “very poor” credit score could also prevent you from obtaining a rental home or apartment, increase the security deposits required for your utilities, or prevent you from getting a cell phone contract: all which mean additional costs for you in the long run.
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