What Is a Good Credit Score – Understanding Credit Ratings & Ranges

credit score dice

When it comes to your credit, it’s important to know how you stack up. Do you have good credit? Excellent credit? Poor credit? How can you find out?

In most cases, the easiest way to determine the health of your credit is to look at your credit score, a numerical value that reflects a mathematical analysis of your debt, your payment history, the existence of liens or other judgments, and other statistical data collected by the credit bureaus. In other words, your credit score is the compact, simplified version of your entire credit history, all rolled up into one tidy three-digit number.

Why Do You Need Good Credit?

The importance of having good credit can’t be understated. From helping you get a loan, to qualifying you for a great job, good credit simply makes life easier and less expensive.

In the eyes of lenders, employers, insurance agents, and a host of other people and entities, the state of your credit represents how responsible and even how ethical you are. For example, lenders look at your credit score to determine not only your ability, but your willingness to repay a loan. Insurance companies view an individual with a good credit score as someone who is trustworthy and less likely to commit insurance fraud. Even many employers run a credit check to determine if a candidate is likely to be a responsible employee. (However, it should be noted that employers only have access to a modified version of your credit report which omits some personal information including your account numbers and year of birth.)

Bad credit can prevent you from being able to purchase a home, work in certain industries, and will wind up costing you a bundle in higher interest rates and fees. However, if you understand what hurts your credit score, you can make an effort to fix bad habits and improve your credit rating.

credit scores

The Three Major Credit Agencies

Experian, Equifax, and TransUnion

There are three major credit agencies that provide consumer credit information (including credit scores) to the majority of interested parties: Equifax, Experian, and Transunion. Each reporting agency collects information about your credit history from a variety of sources, including lenders, landlords, and employers, as well as other sources. These includes public records, current and past loans, your payment history, and other data. They then rate your performance using a proprietary scoring system to come up with a credit score.

Because each agency may access different information and has its own formula for calculating your creditworthiness, it is not uncommon for someone to have three different credit scores.

Understanding Credit Scores

Your credit score is a three-digit number that represents the state of your credit. If you know your score, you can get a sense of how lenders, insurance agencies, and interested employers view your credit:

Excellent Credit: Credit Score Above 800

If your credit score is above 800, you have an exceptionally long credit history that is unmarred by things such as late payments, collections accounts, liens, judgments, or bankruptcies. Not only do you have multiple established lines of credit, but you have or have had experience with several different types of credit, including installment loans and revolving lines of credit. You generally have a stable work history, usually with one company.

Simply stated, you are an A+ borrower in the eyes of all lenders big and small, and will have no trouble securing a loan of your choosing. Be prepared to receive the very best interest rates, repayment terms, and lowest fees available. Insurance companies love people like you because they’re confident that you’ll pay your premiums on time and pose virtually no risk of insurance fraud. Plus, prospective employers love you because you have proven that personal and financial responsibility are of the utmost importance to you.

Very Good Credit: Credit Scores Between 750 and 800

If your credit score is between 750 and 800, you have a long and distinguished credit history that shows a responsible payment history and the ability to handle multiple types of credit responsibly. As a matter of fact, for the most part, you are regarded in the same standard as borrowers with excellent credit history, with the exception that you may have a higher debt-to-income ratio.

In the eyes of lenders, insurance companies, and employers, you’re just as good as anyone with excellent credit and, for the most part, will receive the same red carpet treatment. Ultimately, having very good credit will qualify you for some of the best deals in town.

Good Credit: Credit Scores Between 700 and 750

Having good credit means that you have built a solid credit history by working hard to keep your accounts in good standing – however, there may be a late payment or two somewhere in your past. Things happen sometimes, but they are nothing you can’t handle. You might have had a collections account reported, but you’ve paid it. And you know you have some extra credit card debt, but you’ve made strides to get it under control.

Generally, lenders will have no issues loaning money to someone like you. Your good credit score will land you competitive interest rates and low origination fees, though certainly not as good as you could have gotten with a few more points on your score. You’ll also have no trouble getting an insurance policy for just about any need, but you should expect your premiums to be somewhat higher than for those with excellent or even very good credit.

Furthermore, your good credit should not have any negative effect on your ability to get hired.

good credit can have many benefits

Fair Credit: Credit Scores Between 650 and 700

Having fair credit means that you’ve hit a few speed bumps in the past. Late payments, collections accounts, and maybe even an aged public record dot your credit history. Or, perhaps you simply have too much debt.

Regardless of the reason for the less-than-stellar score, you’ll have a harder time finding a lender willing to service a loan, especially if the low credit score is a result of slow payments. You’ll represent a higher risk of default to a lender and may therefore be required to secure the loan with a down payment or with tangible personal property (otherwise known as “collateral”) before a loan offer will be extended.

Furthermore, unsecured revolving credit will be very difficult to come by. Insurance companies will tend to price insurance policies up for people in your credit category due to the potential for nonpayment of premiums or the higher-than-average risk for committing insurance fraud. Also, some jobs may not be available to applicants with fair credit, such as jobs in the financial sector.

Having fair credit means that you have some work to do in order to get yourself back into good financial shape. It is imperative to take steps now to prevent any additional damage to your credit report, and get back on the road to good financial health. By reducing credit card debt, ensuring that you get your bills paid on time every month, and paying off any open collections, your credit score will move enough during the next three to six months to get you back into the realm of a good credit rating.

Bad Credit: Credit Scores Between 600 and 650

Having bad credit is not a pleasant experience. You’ve had multiple credit issues in the past, most likely involving payment history on one or more accounts. You’ve also most likely had an account or two in collections, and could have possibly had a bankruptcy filing.

It’s going to be extremely difficult to find any lenders willing to lend to you without a significant down payment or collateral to secure the loan against default. Insurance agencies will still underwrite insurance policies for you, but the products will be limited and they are going to cost significantly more than the same products for customers with better scores. You may also have higher car insurance costs.

Some employers – particularly those in financial, defense, chemical, and pharmaceutical industries – will not hire you if you haven’t built or maintained solid credit. They may believe you pose an above-average risk of employee theft or fraud, which could even make it difficult to change positions or get a promotion with your current employer.

Having bad credit means it’s time to roll up your sleeves and get real about your current financial situation. Though your current position may be of no fault of your own – thanks to a job loss, illness, or other unforeseen circumstance – it’s your responsibility to take the necessary steps to reverse the course you are on. Take a good hard look at where you are in your life and take the necessary steps to reverse the trends that led to your bad score.

Very Bad Credit: Credit Scores Below 600

If you have very bad credit, you are more than likely delinquent on more than one account. You have active collections accounts, and probably have at least one judgment, repossession, or bankruptcy in your file. If you have credit cards, they are maxed out or shut off for nonpayment.

This is as bad as it gets, as this will have many negative effects on your life. Lenders, with the exception of those who specialize in lending to borrowers with bad credit, will not approve you for any loan product, even if you can provide a sizable down payment or collateral, and insurance agencies will likely refuse you based on the risks you pose. Often, employers that check your credit will not hire you, whether there is another viable candidate or not.

Bad credit, no matter how bad it is, is still a temporary condition. Late payments will vanish from your records after 7 years, and public records are purged after 10.

While it can be tough to be patient, know that time is on your side when it comes to dealing with bad credit. Now is the time to start making good financial choices: pay accounts on time, pay off collections accounts, and refrain from taking on additional debt. In just a few years, you can say goodbye to your bad credit rating and hello to a world of financial possibilities.

erase bad credit

Final Word

Your credit score is an extremely important part of your overall credit file, but it’s only one piece of the pie. Lenders, insurance companies, and some employers will place a lot of weight on the health of your credit when determining your worthiness.

However, other factors also come into the decision-making process. If you have good to excellent credit, make sure that you take the necessary steps to protect it by repaying your loans on time each month, refraining from obtaining more debt than is necessary, and keeping your other bills paid on time to avoid collections accounts.

If you have bad credit, don’t despair – snowflake your debt, strive to pay off collections accounts, and start paying all of your accounts on time each month.

What would you suggest to improve a credit score?

  • http://www.carinsurancecomparison.com/ Tyler S.

    Is it possible to move from Fair to Good credit score ranges while you still have significant student loan debt if you are paying consistently?

    • nick legarde

      no stupd

      • Jon D

        thats not nice nick :(

        • Nick L

          your stupd :P

        • Bootylovr69

          I like butt

    • Auno

      Student loans don’t effect your credit.

  • Charlie123

    Tried two of these sources for “free” credit reports. Both wanted money or to have me sign up to some kind of pay service. They also get you to give your contact info before revealing this deal breaker so now you are on any number of junk mail lists so they can make some money off you even if you do not buy their service.
    We need to shun this write who is either a shill for these companies or else just a typical sloppy writer who slaps info together for an article without really researching her subject in any depth.

  • Pagar

    I tried also- FreeScore360, paid the dollar- gave ally personal info, then it said information is unavailable at this time. Is this a scam?

  • Terry Pratt

    My bad credit is not a temporary condition. Some years ago I abruptly went from a min wage job to several months in hospital with no job, no income, and no ability to service my debt, plus I was unable to work for a year after that.

    All my open accounts were closed and charged off and one creditor sued me and obtained a judgment. My debts are occasionally sold and resold to debt scavengers, who re-age the accounts, keeping them on my credit report and my scores in the tank. A second creditor sued for the old debt shortly before the statute of limitations would have run.

    Other than the above, I have had no credit activity in the past ten years, but my scores are stuck in the tank and there’s nothing I can do until my poverty level income increases and I am able to resolve the debts.

    • maxnord

      I’ve heard this story over and over again, so sad that a country as wealthy as USA can’t take care of people when they’re sick. Keep voting for right wing Republicans, who are in the back pockets of the “for profit only” corporations – and that’s what you get! When will people wake up and vote big money OUT of office!

      • Muscle man

        If they pay for health insurance instead of cigarettes and alcohol they can have health coverage like everyone else. I pay for my health insurance and don’t expect the tax payers to pay for my hospital stay or for my medicines.

  • http://www.creditrebuild.co.uk/ Geoff

    It’s so easy to ruin good credit, and it can have a powerful effect on not only your ability to get more loans, but also, as you point out, on the interest you pay. Good credit is definitely worth looking after.

  • Rico

    All of you are idiots! This is a scam that keeps you indebted to a financial institution. If you have cash on hand, you can buy with CASH. Guess what, you may get a better deal and you won’t have to pay interest to anyone.

    • http://ecofrugality.blogspot.com/ Amy Livingston

      Wow, you must be really rich to be able to buy a HOUSE with cash! But for those of us who can’t, a mortgage – and therefore a credit score – is a necessity.

  • http://www.facebook.com/nitavsf Nita Stock

    This credit score system is a bunch of CRAP. I just checked mine and according to one reporting co. it shows 745 saying it is “poor”… How’s that possible?? I have noticed that every time I check the ratings keep changing. Now the “excellent” rating is 950 — since when ?????? The limits keep going up and up and up. To top it off, they screw you over with false information, And all of the

  • terry kimball

    is this on my record…? 108

  • maxnord

    The consumer credit rating system is a scam! What about the banks, investment firms, and corporations? AAA credit scores for most of these firms – 2 months later they all crashed, and we were bailing them out to the tune of $3 trillion.

  • http://cibilsupport.com/ Cibil Spport

    Nice Article …I don’t know credit rating is important …After reading this article understand the importance of it.Thanks For Sharing with us…

  • mbods

    I have been using Credit Karma for years. It’s free, you get a FREE credit score, reports and suggestions to better your credit. They don’t harass you to buy anything either. Honestly, why should we have to pay for something as important as our credit scores? Good or bad, it’s what is used today.

  • Sarah James

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    • Molly Moore

      Great site! Thanks for sharing.

  • MasterMind

    I’m at 749… I’m trying to pay off my last credit card, when I do my credit will be “Excellent”.

    • Deepali Mohite

      When your score is 800 and above. You will enjoy the bankers attention when you apply for a loan or a credit card as everyone will like to have you as a customer and offer you a competitive interest rate too. Here you get a power to bargain for a better interest rate.

  • http://creditscore750.com Michael Ha

    Great information. Thanks for providing.

    Michael Ha
    Credit Score Boosting Services

  • Layla Jones

    Find top credit companies where you can get your credit Score for free, no credit card or trial required! visit now >>>>>> GetCreditScoreOnline:com