Credit Score Ranges
From LoveToKnow Creditcards
A credit score range describes a person's credit worthiness. Credit scores typically range from 340 to 850. Nothing is as worrisome as applying for a line of credit and waiting to hear if your credit score was high enough. The best way to prepare for that big loan application is to find out what your credit score is first.
What Is FICO?
FICO is the acronym for Fair Isaac Corporation. This corporation created the program that calculates your credit score. Your credit score in the United States is reported on three different credit bureaus. These include:
Credit Score Calculations
Credit score ranges may vary from credit bureau to credit bureau, depending on the information on your credit accounts. The calculation is based on weighted factors and each bureau uses different percentages. The percentages in this calculation are approximate. These include:
- Payment history- 35 percent
- Amounts owed – 30 percent
- Length of credit history – 15 percent
- Number of new accounts – 10 percent
- The different kinds of accounts reported – 10 percent
Payment History
Payment history is the most important factor in determining credit score ranges. Payment history describes how long you have had open lines of credit and how you have paid on these accounts. The older the account is the higher your credit score, assuming you have always paid your accounts on time. A new account is given a lower credit score, especially if there is no reported payment history.
Amounts Owed
The total amount of your indebtedness is another large factor in determining whether to extend someone credit. The total amount you owe, the minimum payments due and your salary determine whether you can afford another line of credit.
Length of Credit History
The length of time you have had open accounts factors into the calculation of credit score ranges. The time is calculated from when the account was opened to the present. In addition, the amount of time since the last activity is also important. Open accounts that are paid in full are scored higher than accounts that are used regularly and charged to the limit.
Types of Accounts
The various types of accounts you have is also important in factoring credit score ranges. A person who has mortgages and installment loans are scored higher if they are paid on time. Persons with a large number of revolving credit card accounts score lower. A mixture of these types of accounts is desirable.
Credit Score Ranges Breakdown
Each credit score range describes the type of credit risk that you represent. The following is a breakdown of the many credit score ranges:
- 340 to 499 - very low score = high credit risk
- 500 to 549 - low score = high credit risk
- 550 to 599 - better score = high credit risk but secured credit cards may be approved
- 600 to 699 - average score = medium credit risk; the majority of people fall within this range
- 700 to 749 - good score = low credit risk
- 750 to 799 - great score = very low credit risk
- 800 to 850 – excellent score = extremely low credit risk
Improve Your Credit Score
Anyone can improve their credit history. The most significant steps toward improving a credit score is to pay accounts on time. Paying more than the minimum amount due can also improve your credit score.
Conclusion
Credit score ranges are a way for lenders to determine whether you can afford to pay them back. A low score can bar the way to getting credit, whereas a high score can garner lower interest rates and higher credit line offers.
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