Understanding Credit Scores
Your credit score range can decide what terms and interest rates are available to you on loans and credit cards. Knowing where you fit into the basic credit score range can help you understand what is available to you now – and what you need to work on moving forward.
What do your credit scores really mean?
Many people understand the basics of a credit score. Namely, that a higher number means a better credit score. While this is true, it does not paint the whole picture. Beyond a simple score, credit score ranges are actually very important, and your offers may change significantly within a matter of a few points.
Additionally, the scores you get from one scoring model may not be the same as other scores. This is because there are a number of different scoring models, each with their own different versions as well.
With that said, all of the credit scoring models are more alike than they are different. Each ways the core aspects of credit reports similarly, and building up one set of scores will likely build up the others as well.
Different credit scoring models
FICO® and VantageScore® Solutions are the two most popular credit scoring models, and create the most used scoring models in the industry.
FICO® also has two main types of credit scores:
- General scores - General FICO® scores offer generalized information about a person’s creditworthiness.
- Industry scores - Industry-specific FICO® scores create tailored scores for particular type of loan, such as a mortgage, auto loan, or credit card loan.
Credit score ranges
VantageScore® 3.0 and VantageScore® 4.0 both use a score range from 300 to 850. They break these scores down into 4 ranges:
- Excellent: 781 - 850
- Good: 661 - 780
- Fair: 601 - 660
- Poor: 600 - 300
FICO® Score 8 and FICO® Score 9
FICO Score 8 and FICO® Score 9 also use a 300 to 850 model, though they break their scores down into 5 different groups.
- Excellent: 800 - 850
- Very Good: 749 - 799
- Good: 670 - 739
- Fair: 580 - 669
- Poor: 300 - 579
Industry specific FICO® Score
Industry specific FICO scores have a wider range, but follow similar groupings as general FICO scores.
- Excellent: 800 - 900
- Very Good: 740 - 799
- Good: 670 - 739
- Fair: 580 - 669
- Poor: 250 - 579
Same score, different meanings
It is easy to see how a similar score may mean something different depending on which credit scoring model you are using. For instance, a FICO score of 661 is considered fair, where it would be considered good with the VantageScore model.
With that said, many lenders create their own internal systems to analyze and make decisions about whether to approve someone or not. As such, credit scores may be little more than guidelines in some scenarios.
Even so, understanding your general scores and what range you fall into can be immensely helpful for determining what financial products to apply for and judge your likelihood of being approved.
Understanding credit score ranges
While there are some differences in score ranges and groupings, most credit score groupings will follow similar trends. For example, though FICO and VantageScore use different models to reach their scores, they tend to value the same information in slightly different ways. This means that a very low or very high score on a FICO scoring model will probably also be that way with a VantageScore model, and vice versa.
Next let's take a look at how the general score trends could impact your financial future.
Poor to fair – 300 to mid-600s
A score in this range indicates you are very likely to miss payments, default on a loan, or are otherwise a risky person to lend money to. You may not be able to be approved for many types of loans or unsecured credit cards at all.
If you do receive an approval, expect high interest rates and other poor loan terms. This is how lenders manage the risk of lending to you – by making you pay much more to cover the possibility of their loss.
Fair to good – mid-600s to mid-700s
A score in this range may show you are working on your credit or have patchy problems with credit. You may be more likely to be approved on a number of financial products such as loans and lines of credit in these ranges, but you will probably still not get the best terms. Shop around for different options before agreeing to the terms of any financial product.
Very good to Excellent – mid-700 and above
A credit score in this range indicates you are very responsible with financial products. You are very likely to pay back your loans on time, and you will likely not make late payments. The chances of you defaulting on a loan are very low.
Because of this perceived reduction in risk,. lenders are more likely to give you access to the best loan terms, low interest rates, and other premium offerings. Some lenders may still deny you for specific reasons, however, but in general you have the most lending options.
A matter of points
While point ranges are a nice guideline to have, they are not cut in stone. Credit scores are more of a snapshot of your credit behaviors at the exact moment you ask for them. Day-to-day fluctuations in credit scores are very common, and may not be an indication of a mistake or bad habits. These general fluctuations typically make no difference.
In some specific cases, however, lenders may require you to hit very clear benchmarks with your credit score. For instance a score that must be above 750 to lock in a certain interest rate – no matter what. In these cases, these fluctuations may make a big difference, as not hitting this mark may lead to an automatic rejection.
With that said, this is the exception more often than the rule. Knowing where a lender’s threshold is can help you be certain you are far enough above it to factor in for these fluctuations before applying.
In cases where you are after a specific product with a score cutoff, understanding your score range may help you see your chances of qualifying. Building your credit up higher to factor in these fluctuations may help you avoid submitting applications that will automatically be rejected.
Understanding your general score ranges is important to help identify the types of financial products you may be eligible for. Keep in mind that scores normally fluctuate a bit, and it is more important to focus on healthy credit habits rather than worry over a score.