What Does My Credit Score Mean?
So you have a credit score of 700 (or hopefully higher.) Great! What does this really mean? We all know a high credit score is better than a low score, but how do you know if your score is good? If you compare yourself to the average American, whose credit score falls somewhere between 687 and 689 (depending on who performed the data analysis), than a score of 700 is pretty good. However, if you want to know what type of score will render you credit worthy and also, render you eligible for lower rates on loans, you may need a bit more information.
Credit Score Ranges
Free Score provides a pretty comprehensive breakdown of the various credit score levels. FICO (Fair Isaac Corporation) scores are the most commonly seen credit scores out there and your FICO score runs somewhere in the range of between 350 and 850. You have other scores also, like a vantage score or plus score, that have slightly different range minimums and maximums. But, because FICO scores are used by most lenders, that’s what we’ll look at here. Here is a summary of each score range so that you gain an idea of where you stand:
500 or less: Even if you are not at the lowest score of 350, if you are in this range, you have an extremely bad credit score. This type of score results from a history of negative credit items like repeated missed payments, delinquent accounts, accounts in collections, tax liens, etc. If you went out and attempted to obtain any type of financing with a score at this level, you would likely be denied or at best (and any approval at all is a long shot), you’d receive an extremely high interest rate. A score this low may even impact certain employment opportunities.
500 to 579: At this level, your credit score is still really bad, and you likely have negative items on your credit report. But, it’s possible for you to finance a car or even obtain a loan in come cases, depending on your income and the lender. Until you are able to raise your score, you may want to hold off on borrowing to avoid the potential 10 to 20 percent rate (or higher) you’ll likely receive from a lender. An employer may look at this type of score unfavorably as well.
580 to 619: At this range, your score is below average and it could be much better (but hey, it could be worse too.) Depending on your income and other debt, you can likely obtain a high-interest loan or finance a car, but you’re going to be looking at really high rates. You may have a few negative items on your credit report, but you’re probably in a position where you can increase your score relatively easily by getting your budget in order.