What Your Credit Score Numbers Mean

What Your Credit Score Numbers Mean
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Aaron Crowe
By: Aaron Crowe
Posted: April 21, 2015
BadCredit.org's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

Credit scores can make life expensive or a lot easier. A good credit score can lead to a lower interest rate on a credit card, lower mortgage payment or a better loan rate for a car or anything else that requires borrowing money.

A good credit score can mean the difference between being able to afford the home you want, for example, or living in a less desirable area. While a credit score isn’t the only factor used in determining if you’ll get a loan, and at what rate, it’s a big enough factor that improving it can only help.

What’s a credit score?

Credit scores help lenders evaluate a credit report by providing a number that summarizes credit risk at that particular time. It gives creditors a measurement of your level of future credit risk.

Contact a credit reporting agency to determine your actual credit score.

The most widely used credit scores are FICO scores from the Fair Isaac Corporation. The scores are based on information collected by credit reporting agencies. The three main credit bureaus are Equifax, TransUnion and Experian.

FICO scores from each credit bureau consider only the data in your reports at that bureau, and scores may be different at each bureau. Scores change over time, sometimes daily, depending on new information bureaus receive.

What do these numbers mean?

Base FICO scores have a 300 to 850 score range. The higher the score, the lower the risk and the better rates you’ll receive.

Credit scores from Equifax, TransUnion and a FICO competitor — VantageScore 3.0 — have the same range of 300 to 850. Experian has a range of 330 to 830.

A mix of lenders can see the same credit scores differently. An auto lender, for example, may offer lower interest rates to people with a FICO score of 680, while another may use 720. There is no single “cutoff score” used by all lenders.

  • A score of 781 and above indicates you have excellent credit and can expect to pay low interest rates on loans or revolving credit lines.
  • A score between 661 and 780 is considered very good and generally means you won’t have any problems with credit being extended to you.
  • A score between 501 and 600 is a fair score and means you will likely have credit extended, but you can expect to pay slightly higher interest rates.
  • Anything 500 or below indicates you have significant problems with your credit history and will have a very difficult time finding credit.

Even if your scores are less than perfect, there are still plenty of companies that offer credit cards for those with subpar credit, such as the following popular options:

  • Checking account and $10,000 gross annual income required
  • Unlike some other issuers, good credit is not required
  • All credit types welcome to apply
  • Reports to the major Consumer Reporting Agencies
  • Application response in 30 seconds
  • A credit card offer for those currently building credit history
  • Click here for official site, terms, and details.
★★★★★

4.7

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
9 minutes See issuer website Yes 9.5/10
  • Up to $5,000 spending limit in less than 60 seconds
  • Shop from over 100,000 brand name products such as Apple, Samsung, Sony, Gucci, Prada and much more with low easy payments.
  • Less than perfect credit accepted. Approval is quick and easy
  • Must be 18 years or older, have a valid checking account and a verifiable source of income
  • Up to 12 months same as cash
  • 50% Early Payoff discount
  • No hidden fees
  • Return at any time
  • Click here for official site, terms, and details.
★★★★★

4.7

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
8 Minutes See website No New Offer
  • Checking account required
  • A manageable credit limit can help you stay in control
  • This is a credit card - not a debit or prepaid card
  • Track your progress. Your FICO Score is provided for free on your monthly billing statement.
  • Make your payments on time each month, and keep your balance low relative to the credit limit, for positive marks on your credit report.
  • Click here for official site, terms, and details.
★★★★★

4.6

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
9 minutes See issuer website Yes 9.5/10
  • Checking account required
  • Monthly reporting to the major Consumer Reporting Agencies
  • Response provided in 60 seconds or less
  • No security deposit required
  • Apply today, and if approved, pay a Processing Fee and you can access your available credit (additional fees and charges apply)
  • Click here for official site, terms, and details.
★★★★★

4.6

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
9 minutes See issuer website Yes 9.5/10
  • Checking account required
  • Fast and easy application process; response provided in seconds
  • A genuine VISA card accepted by merchants nationwide across the USA and online
  • Manageable monthly payments
  • If approved, simply pay a processing fee to open your account and access your available credit
  • Reports monthly to all three major credit bureaus
  • Click here for official site, terms, and details.
★★★★★

4.5

Overall Rating

Application Length Interest Rate Reports Monthly Reputation Score
9 Minutes 29.99% Yes 8.5/10

What’s in a credit score?

To come up with a credit score, a bureau must have enough recent information about you. The minimum requirement is having at least one account open for six months or longer and at least one account that has been reported to the credit bureau within the last six months.

According to FICO, the information that’s used to determine a credit score, followed by the percentage of that determination, are:

What Makes Up a Credit Score

1. Payment history — 35 percent

This accounts for approximately 35 percent of our overall score. A high rating in this category means paying bills and debts on time with no delayed or missed payments.

Having a long history of making payments is also important here.

2. Outstanding debt — 30 percent

This means looking at the ratio of how much debt you have outstanding to how much available credit you have.

This is also called your credit utilization, and it involves maintaining no more than 10 percent of debt to credit to receive the highest rating.

3. Length of credit history — 15 percent

The longer you have had a credit account, the more it counts in your favor. This rating looks at the oldest accounts, as well as the average length of time for all accounts.

4. Pursuit of new credit — 10 percent

If you have recently applied for credit cards, a car loan or other line of credit, this can actually affect your score negatively.

Every time you apply for credit, a credit inquiry is generated — one or two per year is fine. Just don’t apply for six credit cards at a time.

5. Types of credit in use — 10 percent

Here the rating agencies are looking for a blend of credit types, such as mortgages, student loans, car loans, credit cards and revolving store credit lines. The more diverse the blend, the higher you will score in this category.

Making payments on time and paying at least the minimum amount due will raise a score.

Having a better FICO score can save thousands of dollars over the life of a loan. FICO gives the example of a 30-year fixed mortgage of $150,000 costing $459 less each month by improving a FICO score from 550 to 720, based on national interest rates in September 2007. That equates to saving about $165,000 over the life of the loan.

Be careful with your credit and you will be rewarded with a high score and access to better interest rates.

Photo source: fiscalgeek.com.