Let's face it, most Americans live on credit! Naturally, they often resort to taking loans at lower interests, to reduce their financial burden. This is exactly when credit scores, credit history and credit reports come into play. No loan application is approved before a detailed analysis of the applicant's credit score and credit reports is made. So, what are good credit scores and when do you say you have a doomed credit report? Why are lenders so obsessed with your credit score? Let us find out answers to all these questions.
Credit Score Scale Chart
The FICO scale comprises numbers between 300 to 850 as indicators of the credit scores.
| Credit Score | Rating |
| 760 - 849 | Excellent |
| 700 - 759 | Great |
| 660 - 699 | Good |
| 620 - 659 | Fair |
| 580 - 619 | Poor |
| 580 and below | Very poor |
Credit Score Range Evaluation
As evident from the table above, excellent credit scores assure best prospects of getting a loan, that too at lower interests. Most money lenders will find it difficult to reject a loan applicant with such solid credit scores. Even people with credit scores in a range 700 - 759 may not have any difficulty getting loans at desired interest rates. Generally, any loan application with a credit score of 720 and above is treated in a similar fashion by the lenders. While a credit score beyond 800 is indeed splendid, it may not earn you extra points with the lenders. Your loan application will be reviewed in the same way as the one with a credit score of 720 or above.
Scores below 660 are considered risky and although there is no problem acquiring a loan, you may have to bear higher interest rates. People in the range of 580 to 619 may find it difficult to get loans and even if they do, the interest rates will be very high. People who have very poor credit scores should work upon credit repair before they can hope to get credit. In short, people with credit scores in the range good to excellent have no reason to worry, while those below that should look for ways to improve credit scores.
Credit Score Granting Bureaus
Technically speaking, credit score is a statistical technique of determining the probability of an individual repaying his debt within a specific period of time, by evaluating and analyzing his previous credit history. In simple words, it is a numerical expression of your creditworthiness. Credit scores are granted by three credit bureaus in the US namely, Experian, TransUnion and Equifax. These credit scores are formulated on the basis of a software program developed by Fair Isaac Corporation (FICO), hence also termed as FICO scores. The evaluation is based upon the credit data of an individual, available with the credit bureaus. It is possible that the three credit bureaus have different credit report regarding the same individual, hence he may actually have three different credit scores! Nonetheless, the variation in credit score range is not significant enough to influence the financial fate of a person.
Determinants of a Credit Score
Although, FICO has its own formula for finding the credit score, the variables of that formula are based upon certain known factors. Before we take a look at the credit score rating chart, it would make sense to understand these factors. These factors and their corresponding percentage in deciding your credit score are as follows:
- Payment history (35%)
- Outstanding current debts (30%)
- Length of credit history (15%)
- Types of credit accounts owned (10%)
- New credit applications (10%)
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