A Beginner’s Guide to Understanding Credit Score Ranges

Pop quiz: What is your current credit score? If you are looking to borrow money, get a new car, move into an apartment, or even get a new cell phone plan, your credit score is an important factor. 

In a recent survey, 7 of 10 adults say they feel like they have missed out on something in life due to their credit score. Don’t let that be you. Get the facts you need to know in this beginner’s guide to understanding credit score ranges. 

What Is a Credit Score?

A credit score is an easy way for creditors to keep track of how likely you are to pay them back. The scale goes from 300 to 850, the higher the better.

Your score is based on several factors, but the main ones are your history of paying bills on time and how much money you owe.

Paying each bill on time is extremely important for your credit score, and even a few late bills will ding your score more than you think. As far as how much credit you’re using, it’s best to only borrow up to 30% of your total credit limit. 

Your score also includes factors such as how long you’ve used credit (the longer the better) and sometimes how much money you make. This data is entered into a formula and gives out a 3-digit score that represents your credit risk to the lender. 

There are three primary credit bureaus that track your score: Experian, Equifax, and TransUnion. They vary a little bit in their method of tracking and calculating your score, but generally come up with a similar score. 

Why Is Your Credit Score Important?

Your credit score is important because it affects so many important decisions in life. Having a good credit score will make it much more likely to get a loan for a car, house, or starting a business. 

If your credit score isn’t great, that doesn’t mean you can’t get a loan or rent an apartment, but it probably means that you won’t get the best deal. This might seem unfair, but remember that lender is running a business. They don’t like huge risks.

So, if you’re applying for a car loan with mediocre credit, you might have to pay a higher interest rate. This makes it worth the risk to lend to you. Or, if you’re renting an apartment, you might have to pay a higher security deposit. 

Unfortunately, if your score is too low, you very likely won’t even be able to get the house, loan, or car you want at all. At that point, you’ll need to work on improving your credit before you do anything else. We can help you with this process. 

What Credit Score Ranges Are Considered Good?

On a scale from 300 to 850, anywhere between 300 and 629 is a poor score. It will cause problems for you as you try to access credit, or even create a city utility account or cell phone service. You’ll either be denied or receive poor terms. 

A score between 630 and 689 is a “fair” score. This is much better than poor, but you’ll still run into poor terms and possibly be denied some loans. 

A good credit score is between 690 and 719. This is where the highest percentage of people are at. You’ll be able to borrow money for a home or car, or certainly get an apartment without any trouble.

To get the most favorable rates and terms, your score will need to be in the excellent range, which is from 720-850. The higher your score, the less you will pay in interest, fees, and deposits. 

Different credit bureaus or companies may divide the ranges a little differently, but they’re all fairly similar. No matter what scale is used, the lender will have a pretty good idea of your creditworthiness by looking at your score. 

How Can You Improve Your Score?

Credit scores are not set in stone, they can fluctuate. If you don’t know what your score is, that’s the first step. Contrary to some rumors, it does not hurt your score when you check on your own credit score.

Once you know where you’re at, you can make a plan to improve. The very best way to raise your score is to start paying each and every bill on time, every time. This holds the highest amount of weight in your score. 

The next thing to do is to pay close attention to your credit card bills. Pay these off in full each month. Only borrowing up to 30% of your credit limit is good, but it’s even better to keep it at 10% of your credit limit. This helps raise your score. 

You should also limit your hard inquiry credit requests. These occur when you buy a car, apply for a credit card, or anytime a financial institution does an official check of your credit score.

While you can check your own without it affecting your score, when a lender does it for official business, it can lower your score temporarily. This isn’t necessarily bad if you follow through on your payment plan.

Actually, there’s no way around it when you are applying for credit. The key is not to apply for too much credit and to follow through with every payment. Your score is only affected a few months with these hard inquiries, so just do it sparingly.

The last way to improve your credit score as efficiently as possible is to hire us to help you do it. 

Contact Us and Raise Your Score

Your credit score is extremely important to many parts of your life. If you would like professional help getting your score as high as possible, please contact us.

We know the ins and outs of the credit score ranges and can help create a plan for you to increase your score as much as possible. Don’t miss out on any big life decision because of your credit score. We can help.