Credit Score Ranges And How They Affect Your Financial Profile

Credit Score Ranges And How They Affect Your Financial Profile

What Are Credit Scores and What Do They Really Mean?

Your credit score affects your financial profile and many aspects of your life. Learn what each credit score says about you and how it affects your financial profile.

One of the main things adults worry about is their credit scores and for good reason. Credit scores influence what financial products you are eligible for, such as credit cards, mortgages, and loans for federal employees. Let’s talk about credit score ranges and what they mean.

What Is A Credit Score?

A credit score is a system used to estimate how much of a risk an individual is to a lender. It tells lenders and financial institutions how likely you are to pay your bills and loans.

Credit scores range between 300 to 850. Data about your finances are gathered by credit bureaus, such as Fair Isaac Corporation (who developed FICO), Equifax, Experian, and TransUnion (who developed VantageScore). What pieces of information do they gather to calculate your credit scores?

• Payment history
• Credit usage
• Credit history
• Types of accounts
• Recent credit inquiries

Credit Scores Ranges

Although FICO and VantageScore both have different ratings, they use the same concept: the higher your score is the less of a risk you are to lenders, and vice versa.

Excellent Credit Score

An excellent credit score means that the individual is financially responsible. These are individuals who pay their bills on time, have 30% or less credit utilization rate, and have long-standing accounts or credit cards. People with excellent credit scores will have an easier time getting approved for exclusive credit cards and loans with favorable terms. In addition, they are more likely to be offered additional perks like rewards and luxury perks.

Good Credit Score

A good credit score indicates that the individual manages their finances better than most people. As such, they are considered a relatively low risk for lenders or financial institutions. With that said, those with a good credit score will likely be qualified for credit cards and loans with competitive interest rates. However, they may not enjoy the same luxury benefits as those with excellent credit scores.

Fair Credit Score

A fair credit score means that the individual doesn’t have a flawless credit history –they may have missed a payment some years ago, but do not have major delinquencies, especially in the recent past. Federal employees, as do most US consumers, fall into this category. With a fair credit score, your options may be somewhat limited. Although you may qualify for mortgages, auto loans, personal loans, or credit cards, the terms may not be as favorable. Fortunately, there are loans for federal employees that offer better terms and interest rates.

Poor And Very Poor Credit Score

A poor credit score means that the individual’s credit history is severely damaged. They may have defaulted on loans or credit cards, filed a bankruptcy, or have no credit history. In addition to having difficulty getting approved on various financial products, those with poor credit may also have a hard time qualifying for rental properties. A poor credit score may also affect the cost of insurance premiums.

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