What You Need to Know About Credit Score Ranges

Understanding Credit

Your credit score. You know you need a good one to qualify for a mortgage, car loan, credit card, and even a cell phone contract in some cases, but do you know what credit score range is and how it impacts your credit score?

The first step to building your credit is increasing your credit knowledge. Knowing how your credit score forms into the three-digit number that lenders use to decide whether to establish a relationship with you is key to achieving your credit goals. It all starts with a credit scoring model.

What is a Credit Scoring Model?

Scoring models calculate credit scores. A scoring model, such as VantageScore®1, takes financial details on your credit file reported by the three major credit bureaus, Experian®, Equifax®, and TransUnion®, and performs a statistical examination that results in your credit score. The scoring model considers many factors, including how much credit you have (credit limits), your debt management behavior (payment history), and the types of credit you have (credit mix) in this process.

Different scoring models use different methods to determine your credit score, but they all tell lenders the same thing: if doing business with you will be high risk or low risk. If your credit score falls on the lower end of the score range, it tells lenders that the risk of you failing to repay your debt as agreed is higher than if your score falls on the higher end of the score range, which signals less risk for the lender.

Aside from a lender’s risk factor, scores that fall higher on the credit score range mean that as a borrower, you could qualify for lower interest rates, deposits, fees, and even security deposits for an apartment or house rental. Translation: the higher your credit score, the more money you can save in the short term and the long run. 

More About the VantageScore

Created by the three major credit bureaus, Experian, Equifax, and TransUnion, the VantageScore1 scoring model uses a range between 300 and 850 to determine your creditworthiness (again, how risky it is to have a financial relationship with you). A VantageScore1 above 661 is considered “good,” while above 781 is viewed as “excellent.” 

Is There More Than One Credit Score?

Lenders have access to numerous credit scoring models, like FICO® Score2, which you be familiar with, as well as VantageScore1. Some reports estimate that there are over 1,000 scoring models, although some are used more than others.

What is a Good Credit Score?

Credit scores ranges fall between 300 and 850, while the average VantageScore1 is 680. The higher your credit score, the more lenders will consider you more likely to repay your debts as agreed. Lower scores indicate higher repayment risk for lenders and creditors, resulting in you paying higher interest rates and down payments. Generally, a VantageScore1 above 661 is considered “good.”

Here’s a snapshot of the score categories on the VantageScore1 credit score range:

1. Very Poor: 300-499

2. Poor: 500-600

3. Fair: 601-660

4. Good: 661-780

5. Excellent: 781-850

Is it all “Good?”

As you can see from the chart above, while “good” credit typically starts at 661, “bad” credit typically begins with a 300 credit score. Improving your credit score starts with knowing where you fall on the score range and what you need to do to make it work for you and your financial goals. Understanding score ranges also helps you track your progress as you build your credit knowledge. By practicing patience and maintaining healthy financial habits, such as avoiding late payments, you can establish “good” credit.

Are you ready to find out where your credit score falls on the credit score range? Click over to the Experian Credit Center. It’s new, and it’s live on the Total Credit Solutions website.