What are the Credit Score Ranges?

Credit score ranges are like grades in school…

At most schools, a grade between 90 and 100 is an A. Between 80 and 89 is a B, 70 and 79 is a C, and so on. Credit score ranges are like this, too. Scores above a certain number are similar to getting an A on your credit report. All of the choices you make to study and spend extra time on your papers eventually influence what type of college you get into and scholarship money you’ll receive. Depending on the grade you get on your credit report, you can similarly expect to qualify for different loans and pay different interest rates.

Credit scores are numerical scores that range from 300 to 850. Higher numbers indicate better credit, just like a higher score on an exam indicates a better grade.

Like the letter grading system that people are familiar with from school, there are different credit score ranges that most credit bureaus and lenders agree on. The credit score ranges are:

• Very Poor: 300 - 579
• Fair: 580 - 669
• Good: 670 - 739
• Very Good: 740 - 799
• Exceptional: 800 - 850

There are a wide variety of credit scoring models. One of the most popular is the FICO Score, developed by Fair Isaac Corporation. Even within the FICO Scoring model there are multiple ways of calculating credit scores.

For example, you might get one score using the FICO Score 8 model and a different one using the FICO Mortgage Score model.

All credit scoring models look at similar information about how you’ve managed your bills in the past. Some of the most important factors in determining your credit scores are your payment history and how much debt you currently have. Generally, the more on-time payments and the fewer late payments you’ve made, the better your score will be. Having lower debt balances compared to your credit limits also helps to increase your credit score.

It’s important to note that while the credit score ranges are useful for getting a quick idea of the quality of your credit, they don’t offer any concrete perks or guarantees. You could have a perfect credit score and still find a lender that denies your application. Similarly, you could have very poor credit and find a lender willing to extend credit to you.

Instead, you can use the credit score ranges to gauge your ability to borrow money. Generally, people with good credit scores have higher access to credit and find it easier to borrow large sums of cash. They also tend to pay lower interest rates than people with poor credit.

Credit score ranges are also helpful for setting goals. If you have good credit, setting a goal to improve your credit into the very good range gives you a specific target and can encourage you to work toward that milestone.

There are five credit score ranges that borrowers can fall into.

If you have very poor credit, the odds are good that you’ve missed some payments in the past or racked up large balances on your credit cards. Some people reach this point after declaring bankruptcy.

The majority of lenders view people with very poor credit scores as high-risk borrowers. That means people with very poor scores are likely to have trouble qualifying for any kind of loan. If they do manage to get a loan, it will likely come with high interest rates and fees.

For borrowers with very poor credit, the best option is usually to open a secured credit card (a card where the borrower must provide a security deposit) or a secured loan. These types of loans pose far lower risks for the lenders, because the borrower has to offer some form of collateral. However, they still function as loans and the lenders report the activity to the credit bureaus, giving the borrower a chance to improve his or her credit score by making timely payments.

People with fair credit usually have some access to credit, but it can be more difficult to find a willing lender than it is for someone with a better credit score. These borrowers may have to submit applications to multiple lenders before they receive approval.

When they do get approved for a loan, people with fair credit usually have to pay higher interest rates and may have to meet other requirements, such as offering larger down payments on loans like auto loans or mortgages than borrowers with good credit.

People with good credit won’t have much trouble qualifying for most loans. While premium credit cards and large, unsecured loans (loans where the borrower doesn’t need to offer collateral) might be out of reach, most lenders have options for people in this range.

Borrowers in the good credit range also receive more competitive interest rates than people in the lower credit ranges. They might not get the best rates that lenders have to offer, but the rates will be reasonable.

In the United States, the average consumer has a FICO Score of 701, which is roughly in the middle of this range.

Consumers with very good credit can apply for almost any credit card or loan and reasonably expect an approval from the lender. These borrowers also command competitive interest rates, so they can access credit at a lower cost than other consumers.

Reaching this credit range requires a history of on-time payments and good management of your debts.

Borrowers with exceptional credit can qualify for almost any loan and are likely to receive the best rates for any loan they receive.

Reaching this range requires a very long history of managing your credit well, but also requires having a solid mix of accounts and relatively few new accounts and applications for credit.

People with exceptional credit using one of the popular scoring models such as FICO Score 8 (the most widely used model) can also assume they have strong scores in other models, such as the FICO Mortgage (used when you apply for a mortgage, based on older FICO models) or FICO Auto model (used when you apply for an auto loan). Each model produces a different score, but people usually fall into a similar range across scoring models.

With the FICO Scoring model, the perfect credit score is 850.

A credit score of 850 does not mean that every aspect of your credit is perfect. Two people with 850 scores can have small differences in their credit histories. For example, one might use 6% of their credit limits while the other uses only 5%. A credit score of 850 means that a borrower’s credit is so good that small differences don’t matter much when it comes to lending risk.

Very few people can reach a perfect credit score. It requires an incredibly long history of making on-time payments on your debts. It also involves optimizing the other factors that play into your credit score, such as maintaining a low ratio between your debts and your credit limits, a mixture of different types of loans, and avoiding excessively applying for new credit.

Some factors that affect your credit score, such as the ratio between your debt and your credit limits, changes from month to month. So you may have perfect credit one month only to find your score dropping slightly the next, even if you made every payment on time. Keep in mind that credit score ranges are wide and that a change of a few points usually does not make a huge difference to lenders, especially if your credit score is in the exceptional range.

Using the FICO Scoring model, a credit score between 800 and 850 is considered excellent (or exceptional). While it can be difficult to reach a perfect credit score, achieving a score in the excellent range is more realistic, even if it isn’t easy.

If you have a credit score in the exceptional range, you can expect to qualify for most loans that you could reasonably apply for. Lenders are more likely to deny you for reasons such as asking to borrow too much in comparison to your income than they are to deny you because they don’t trust you to repay the loan. Having an excellent credit score brings a host of benefits.

One is that many premium credit cards only accept applicants with strong credit. These cards come with lucrative rewards that you can earn points toward qualifying purchases when you swipe the card. They also offer several other perks, such as access to airport lounges, credits that you can use toward airline fees, and premium service when you stay at hotels.

Many of these cards also offer 0% APR introductory periods where they charge no interest. You can use these cards to borrow money for months or even a year without paying for the privilege, making it much cheaper and easier to make large purchases on credit.

Borrowers with excellent credit also generally receive the lowest interest rates on loans and can avoid having to offer security deposits (such as to a utility company) or paying fees that people with lower scores may have to.

Getting an excellent credit score means handling credit well and building a history of on-time payments. Five factors that affect your credit score, and you’ll need to do well in each factor to achieve excellent credit.

Payment history is the most important part of determining your credit score. It tracks how well you’ve paid your debts in the past. Every on-time payment helps your score while late and missed payments hurt it.

Late and missed payments damage your score far more than timely payments help it, so the best way to ensure you get excellent credit is to never miss a single due date. Many creditors offer an option to set up automatic payments, which is a good way to avoid late and missed payments.

The amount you owe is the second most important part of calculating your score. Two things play into calculating the impact that this factor has on your credit score.

First is the total amount of debt you have. The more you’ve borrowed, the lower your credit score tends to be. Lenders prefer to lend to people with few other obligations because it usually means the borrower can handle the monthly payments.

Second is your credit utilization, which is the ratio to your revolving debt to your credit limits. If you’re maxing out your credit cards, lenders may see that as a sign of financial distress and that you’re close to defaulting on your payments.

The length of your credit history impacts your score slightly. A couple of things affect this.

One is how long you’ve had access to credit. The longer it’s been since you’ve established your first loan or credit card, the longer it’s been since you got your most recent loan, and the older your average credit card or loan is, the better it is for your score.

The FICO Scoring model also looks at how long it’s been since you’ve used some of your loan accounts. Generally, it helps your score if you only borrow money when you need to.

Lenders like to see people who have experience with different types of loans. Your credit mix plays a small role in determining your score. Generally, having a mix of credit types, such as mortgages, credit cards, student loans, and retail accounts, improves your score.

When you apply for a credit card or a loan, the credit bureaus make note of that application in your credit report. The new account also appears on your report when you’re approved.

Generally, lenders see applying for lots of credit and opening multiple new accounts in a short amount of time as risky behavior. That means that each application drops your credit score by a small amount.