What are the different credit rating ranges?

Many consumers know that a credit score consists of three numbers, but some may not know what these numbers actually mean.

FICO scores and VantageScores, the two most widely used scoring models, range from 300 to 850.

In this article, we will discuss different credit score ranges, the factors that affect them, and ways to improve your credit score.

What are the different types of credit scores?

If you’ve ever checked your credit score, you’ve probably been shown a three-digit FICO or VantageScore ranging from 300 to 850.

FICO points

FICO scores are used by 90 percent of the top lenders, according to the organization that developed the score. FICO scores range from 300 to 850 and are calculated using the five main categories of your credit report: payment history, credit usage, credit history length, credit balance, and new credit. Here’s how the FICO score range works:

• 800-850: Exclusive
• 740-799: Very good
• 670-739: Good
• 580-669: fair
• 300-579: Bad

Here is how each scoring factor works:

• Payment history (35 percent): This is a record of timely payments for credit cards and loans, as well as any negative records such as missed payments, collections, and charges.
• Credit Usage (30 percent): Shows how much of the total available credit you are using. The general rule of thumb is to keep your credit utilization below 30 percent, but the lower the better.
• Length of credit history (15%). This simply shows how long you’ve been using credit, taking into account factors such as the average age of your accounts and the age of your oldest and newest accounts.
• Credit balance (10 percent): This factor takes into account what types of accounts you own and manage. A combination of both revolving accounts and installment accounts is generally better for your account than just one type of account.
• New Credit (10 percent): Your score may be temporarily lowered if you open multiple new accounts in a short period of time, but this effect wanes over time as your accounts age.

VantageScore

VantageScore is a relatively young credit scoring model developed by three major credit bureaus – Equifax, Experian and TransUnion. Here’s how the VantageScore range works:

• 781-850: Excellent
• 661-780: Good
• 601-660: fair
• 500-600: Bad
• 300-499: very bad

VantageScore takes into account four key factors:

• Total Credit Utilization, Balance, and Available Credit (Extremely Influential)
• Credit set and experience (very influential)
• Payment history (moderately influential)
• Age of credit history and new accounts opened (less influential)

What is a good credit score?

As you can see above, a good FICO score is in the range of 670-739 and a VantageScore of 661-780 is considered good. This type of score can help you qualify for various credit cards that offer generous rewards and other benefits, especially if your score is over 700. However, you may need to be at or above the top of the “good” range to get the most generous premium cards.

A good credit score can also help you get a relatively low interest rate—an important consideration given that the average annual interest rate on a credit card is well over 19 percent.

What is a bad credit score?

A bad credit score is a FICO score below 670, and a bad score in the VantageScore model is below 661, both of which fall within fair or bad credit ranges.

For people with poor credit scores, getting loans and credit cards with favorable terms is often difficult.

A low score can make it harder to get a loan and lead to higher interest rates if you qualify. It may also affect rental applications, insurance costs, utility deposits and credit limits. If you have a low score, the lender may think that you are more likely to pay late or default on the loan.

You may have low credit because you missed payments, used up too much available credit, applied for a large loan in a short time, or defaulted on your bills.

How can you improve your credit score?

Why is your credit score so important? It is a reflection of how you manage credit and is used by lenders to assess your level of risk.

If you have a low credit score or are in the “good” range and want to move up a level, such as “very good” or “exceptional”, it can be improved. Strategies for this include:

• Pay your bills on time, every time.
• Pay the balance in full each month. If you must have a credit card balance, keep it as small as possible.
• Apply for a loan only when you need it.
• Do not close credit card accounts, especially if they are older and have a positive history.
• Keep a healthy mix of revolving and installment accounts.

Remember that your credit score is not permanent. Negative ratings usually decrease over time and disappear after seven years. You can always improve your score, but it can take a while depending on what’s hurting your credit and the steps you take to restore it.

bottom line

Good credit scores can unlock many benefits, from access to more financial products to lower interest rates.

If you’re already at or near the top – between 800 and 850 – you can probably qualify for just about any credit card you want without having to focus on getting higher. But even if your rating is in the “good” range, it’s worth raising the bar a little.

CreditCards.com Team This article was created using automation technology and carefully edited and reviewed by our editorial team.