What is a good credit score range? After all, knowing this is an important factor to your financial well-being.
In fact, having bad/poor Credit can ruin your financial plans and ability and costs you thousands more in interest.
Whether you’re a high-income earner or in the middle of the pack, monitoring your credit score and knowing which category (excellent, poor, etc.) you’re in before financing is important.
So, what is a good credit score range?
Well, when creating their predictive algorithms (i.e. the credit score ranges) the Fair Isaac Corporation (FICO) emphasizes key indicators that identify risky behavior.
Here’s how FICO determines credit scores:
1) Thirty-five percent goes to your payment history,
2) Thirty percent is dedicated to total owed,
3) Fifteen percent of your score is weighed by length of credit history,
4) Ten percent is new credit and,
5) Another ten percent is based on type of credit (loans, mortgage, credit, etc).
VantageScore created by Experian, TransUnion and Equifax, developed their own credit scoring model in 2006 and here’s a quick breakdown:
1) Extremely Influential – Payment History
2) Highly Influential – Age of Credit and Percentage of Credit Used (30% is the max recommended)
3) Moderately Influential – Total Balances/Debt
4)Less Influential – Recent Credit Behavior and Inquiries/Available Credit
Below you’ll find the good credit score ranges for both FICO and VantageScore:
As you can see, each category takes a different level of importance depending on how effective it is at predicting risky behavior.
Knowing more about how your credit score is put together can help you either prevent credit damage or help you know how to fix what you are doing wrong.
Standardizing credit score ranges
In the past, VantageScore 1.0 and 2.0 had a different credit score range. In previous versions, it used to range from 501 to 990. However, in VantageScore 3.0, they adopted FICO’s range (300 to 850) to make it easier for lenders to standardize evaluating risk.
However, even though both models use the same credit score ranges, in an effort to be unique, VantageScore does not use percentages when it comes to weighing different factors that contribute to your score.
Regardless, you can still take steps now to have good credit. And if you’re new to credit, then it’s a good idea to understand what contributes to your score and start using it wisely.
What is a good credit score range – Get the ball rolling
The best way to get good credit is to start using it a lot in small quantities that you know you can pay the balance off, in full, for each billing cycle.
The more of a track record you have of using credit wisely, the quicker your score will grow. Also, don’t overdo it with credit card applications as that can negatively impact your score through a hard inquiry. However, looking up your own score (soft inquiry) will not damage your credit score.
Is it possible to have an 850 credit score?
To obtain a perfect 850 credit score (a score that less than 1 percent have), you’d have to follow the best practices when it comes to finances constantly.
Technically, an 850 credit score isn’t necessary to receive the best rates and offers from lenders and credit card issuers. It’s just a nice ego boost to know you have the top score and are in a very small category.
Generally, with a score of 740 or above, most lenders will see you in a very favorable light as your credit is considered Very Good by both credit scoring brands FICO and VantageScore.
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