The different credit rating ranges you need to know

You need to know and know where the credit score is in the credit score range to interpret your rating and what that means about your borrowing power. For the most part, all credit scores serve the same purpose, which is to help lenders see how risky it can be to approve your loan.

High scores specify or suggest low risk for lenders and low chance of default. On the other hand, low credit scores mean higher risk. A very low score indicates a poor experience with debt management, which could lead lenders to reject your loan application.

Sometimes creditors use credit scores, along with other data like proof of income and employment history, to determine how much they’re willing to lend you and at what interest rate. For a little help, we’ll walk you through the different credit rating ranges to help you interpret your score. Read on!

Scoring models

Credit scores are calculated using scoring models (computer programs). These computer programs perform advanced statistical analysis of your credit report content, debt repayment history, and borrowing.

Credit Scoring Models look for patterns in your no credit check credit report that are closely associated with consumer defaults. Derived from the absence or existence of these models, credit scoring models give you a score, usually a three-digit number, indicating your expected level of risk relative to other consumers.

Credit scoring models created by various companies, for example, VantageScore® and the FICO® * score, vary in the way they calculate and interpret scores. When taking note of how credit scores have changed over time or differentiating one score from another, it is essential to understand the following to ensure that you are making the right comparisons:

  • The version of the scoring model.
  • What model was used to calculate your credit score?
  • Which credit bureau provided or provided the credit report from which your credit score was obtained.
  • The lowest and highest credit scores you can get through this model.

So whenever you get a score, whether it’s when you inspect your own credit score or a lender outlines a loan decision, the law needs or requires that this information be included.

Credit score ranges

Trying to learn and decipher a credit score without understanding the range is like putting on clothes to go out when the temperature is thirty. Simply put, knowing which score range to apply makes a significant difference, for example, a credit score of 700.

On the FICO® rating range of 300 to 850, a credit score of 700 means good credit and would make you qualified for different loan offers. About 90% of all loan decisions use FICO® scores. So, a FICO® score is, for the most part, an accurate or exact reflection of your reliability as a creditor can see it.

On the other hand, on the VantageScore® rating range, a credit score of 700, which also ranges from 300 to 850, indicates fair credit. Keep in mind that this scoring model is developed differently.

What do your credit scores suggest?

Since general credit scores refine or purify your loan payment behavior and credit usage history as a single point of reference, creditors typically use them as a barometer of credit quality. Each creditor sets their own standards. However, here’s a quick rundown of how creditors view the different groupings of FICO® scores:

  • 300 to 579: This rating range is considered poor. Many creditors reject loan applications from people with credit scores in this FICO® rating range, which could be derived from a huge credit problem.

Moreover, aspirants for a credit card with such credit scores can only opt for secured cards which require a cash deposit.

  • 580 to 669: This rating range is classified as fair. Creditors can turn down applicants with these credit scores if they apply for huge loans. People with a credit score in this range can be considered subprime borrowers, qualified only for loans with higher interest rates.
  • 670 to 739: This rating range is considered good. Creditors consider people with scores in this range to be acceptable borrowers. These people are eligible for a wide variety of credit cards and loans. However, they will have to pay higher interest rates.
  • 740 to 799: This rating range is classified as very good. People whose scores fall within this rating range qualify for better interest rates from creditors.
  • 800 to 850: This rating range is considered exceptional. People with scores within this rating range usually go through simple approval processes when applying for a loan. In addition, they usually offer the lowest fees and interest rates.

Carry

Knowing where your credit score falls within the rating range of the credit scoring model that created it is essential in interpreting the score. In addition, it is essential to any plans that you may have to improve and monitor your credit score in the long term. Check the Credit Score Trends to have a better knowledge of credit scores.

About Madeline Dennis

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