What is the Credit Score Scale?
The most common type of credit score is the FICO score, which was developed by the Fair Isaac Corporation. Other types of credit scores exist, such as VantageScore and Asset Score, in addition to industry-specific scores like the auto insurance score but depend on the agency that created them, and they may not be used by every lender.
The range of most credit scores is 300-850. A score in the low 700s qualifies for a traditional mortgage and a score over 700 qualifies for the best rates. 800 is considered exceptional, while anything over 850 is near perfect.
All credit scores are not created equal: FICO ® vs. FAKO Scores
If you’ve ever shopped for a loan, signed up for a credit card, or applied for a job, you’ve probably seen the phrase “credit score.” However, have you ever asked yourself, what is a good credit score? Not all credit scores are created equal – to complicate matters even further, some people use the same terminology, but are referring to different things. That’s why it’s important to understand which credit score we’re talking about when you hear the phrase “credit score.”
Most people are familiar with the FICO score. Generated by the credit bureau Experian, FICO scores range from 300 to 850. Lenders and creditors use this three-digit number to determine if you are creditworthy and the interest rate you should be charged.
However, FICO scores aren’t the only scores used today. The FICO score isn’t the only credit score out there.
Your FICO score is one of the most important measures of your creditworthiness. The FICO score was introduced in 1989 by the Fair Isaac Corporation and is used by many lenders to determine whether you are likely to repay a loan. The score is based on the information in your credit report, including information that is sourced from your credit card issuers, mortgage lenders, and other lenders.
A FICO score of 700 or close to this figure is considered a good credit score. At this point, it’s probable that you’ll be offered the best rates and terms on credit cards and loans. But if you get a score of less than 700, you might not be able to take advantage of the best terms and rates.
A FAKO credit score, initially branded as “FICO”, is a completely made-up number that’s tied to your credit score. FAKO is an acronym that stands for Fair Isaac Corporation, which is the company that essentially invented the credit scoring model (you can read more about credit scoring and the three major credit bureaus here).
FAKOs are popular because people find them interesting and easy to read. They also want to know where they stand based on what lenders think about their credit.
FAKOs are especially intriguing for those who want to get a sneak peek at their credit information without paying for a credit report.
Why? Information on your credit report, while up-to-date and accurate, isn’t broken down by the most useful categories for credit consumers. With a credit report, you won’t understand which factors contribute to a higher or lower score and whether you have too many loans or too few.
FAKOs can help answer those questions because they’re typically easier to read. They also allow you to compare how the credit department at a lender views your score.
Other FAKO scores
Your FICO score is not the best. The typical score for a bank or loan co as they back up loans is about 730. As for some car companies, they will sometimes use a score of 670 as that needed. But for credit cards most companies use the middle range score of about 750.
Credit Score Simulator – 850
Although you can find cheap credit score simulators somewhere on the web, they will not produce the same scores because the simulation scores focus more on doing timely and accurate funding rather than the issuer and the deposit holder.
A company credit score simulator is recommended. Those can typically be used for free. Many banks and other institutions will use a company credit score simulator when they are looking at lending applications.
T Score – 1100
T score is not a true picture of your credit worthiness. It is a credit score used by the medical industry. Delving into the MDR3 gene can help to boost your T score by 30 to 40+ points.
The Danger of Relying On FAKO Credit Scores
The easiest way to estimate your credit score is to check what is known as a FICO score. FAKO, or Fake, scores, use a formula to estimate a credit score based on the data used by the real credit bureaus. FAKO scores are generally easy to get and cheap but they are not your official score.
How is your credit score estimated?
When you want to buy a home or a car, the banks check your credit score because this information gives them a good indication of whether they should lend you money. But before they do, they look at your actual credit history (Your report).
Based on the information in your report, a few things might happen. The bank might give you some money or decline you, which is known as a negative credit decision. One thing a bank will almost always do is check your credit score.
Knowing your credit score and history allows the bank to figure out how likely they are to lend you money. If you have a good credit history, you probably will get a loan. If you don’t, well, you might have a problem.
What is a Good Credit Score Range?
From the perspective of a lender, an excellent credit score (920+) is an indicator that you’re a very good risk for a loan.
This is because of the fact that an individual with a high credit score is more likely to pay their bills on time, regardless of interest rate, loan terms, or other variables.
Though credit scores vary widely among individuals, the generally accepted range for an excellent credit score is between 850 and 919.
How to Monitor Your Credit Score
If you’re like most people, you may have never given your credit score much thought. And yet most people have a good idea of what a good or bad score looks like. Determining a good credit score, however, is more complicated than deciding that a high score should be considered good. Many factors determine how lenders view your credit report and assign a number to your credit score. Therefore, I’m going to look at how your credit score is determined and explain how you can use your credit score to repair your credit.
Why do you need to monitor your credit score? A good credit score is important and it can save you money. Many lenders look at your credit score when you apply for a loan. A good score may allow you access to a lower interest rate on a loan. In addition, it can help you qualify for an apartment, cell phone plan, or even a job.
In fact, some employers use credit checks to qualify applicants for certain jobs. Some landlords also use credit reports to evaluate prospective tenants. Credit reports and scores are even used by an increasing number of insurance companies to determine rates.
Monitoring your credit score can help you catch incorrect or fraudulent information faster. Good credit can make your life easier in so many ways. To get those benefits, however, you need to have a credit score in the right range.
Resource #1: MyFico
Most people find out what average interest rates are and what available credit is when they get their credit reports, and then compare it with their own personal situation. What may not be obvious is that most consumers do not know the average score, or what score is considered good, excellent, or bad.
The first step in determining your credit score is knowing your credit report. Your credit reports are provided to you by the three major credit bureaus – Equifax, Experian, and Transunion. The Fair Credit Reporting Act requires these credit bureaus to provide you with a free credit report per year.
Typically, you can request the report from each of the three bureaus at least once a year. You can also purchase credit reports from Equifax, Experian, and Transunion. If you purchase your report directly from the bureau, you will be eligible for a free yearly report from the other two bureaus as well.
So ensure that you check your credit report and scores regularly. After you have determined your credit score, you can then begin to evaluate what your options are based on your situation.
Resource #2: FreeCreditReport.com
Credit scores are important. They are used by lenders to decide what interest rate you’ll get on a loan, whether you’re eligible for a loan at all, and how likely you are to repay a loan. The higher your score, the more likely you are to get approved for a loan and the more likely you are to be paid the amount you’re expecting.
Resource #3: Companies That Monitor FAKO Scores for You
I’m going to challenge you on this one, as I think that the credit score itself is flawed, but I will concede that it is the minimum benchmark we have for measuring the health of our credit.
A better benchmark would be the specific free tools provided by the credit reporting agencies to understand how credit health is being measured every month.
I have a complete list of all the ones that I accept are legitimate, and they track our credit based on real accounts, so we can maintain our score in real-time.
We should all be reviewing our credit reports and scores every month.
Otherwise, we’re in the dark about what’s going on with our own accounts.
A bad credit score makes it harder to get loans, higher interest rates, fewer credit limit offers, and many other things.
But, on the other hand, a good credit score can often open doors to loans and credit lines without even having to apply.
A poor credit score will make it difficult or impossible to obtain financing for big-ticket items such as a car or a house.
A great credit score will make it easier to get favorable terms and rates for existing accounts, such as mortgages and other lines of credit, as well as new financial products.
How to Improve Your Credit Score
What is a good credit score? The answer to that question depends on who is asking.
What’s a Good Credit Score for a Mortgage?
A good credit score for a mortgage can be considered as anything above a 620 as you are likely to get the lowest available rates on your mortgage loan. It is very important to take this step as it enables you to borrow the loan equal to up to 95% of the value of your property.
For this, you should take help of a mortgage broker who will get you the best and the lowest rates.
What’s a Good Credit Score for a Car Loan?
For a car loan, you aim for a credit score of between 660 and 720. A good way to start building your credit score is by paying for your daily purchases, including your utilities, gas, grocery bills, etc. entirely with your credit cards. This is a good indicator of your ability to use credit responsibly.
What’s a Good Credit Score for an Auto Insurance Policy?
A good credit score for an auto policy is around 580. If you have all three elements included above, you are well on your way of buying auto insurance. It is very important to keep the above things in mind, as they will reduce the premium amount on your policy.
Get a secured credit card.
A secured credit card is a great way to build credit, even if you have bad credit, because it requires you to make a deposit equal to your credit line. This deposit can range from a few hundred dollars all the way to the maximum credit limit. I used a secured card to help boost my credit score from a 437 to a 681 in about five months. I even had a couple of credit cards with major credit issuers such as Bank of America and GE Capital, but I still had issues with my score. Having a baggage secured credit card, though, helped my score from jumping up 81 points in less than a year. I can’t guarantee the same results for your situation, but I can tell you that a secured card is a super easy way to start rebuilding your credit score.
Do you have bad credit? Does opening a secured credit card interest you? Read my original secured credit card review from 2010 and check out our best options for 2016.
Look at and dispute errors on your credit report.
You can request a free copy of your credit report once a year from each of the three credit bureaus: Equifax, Experian and TransUnion.
Check every credit report to see if all of your information is correct, because one credit bureau's report may differ from the others. Look especially for accounts you do not recognize and incorrect information on your address, employment and personal information.
If there is incorrect information on your report, you can dispute the errors with the credit bureau and your dispute will be made part of your credit file.
You always have the right to verify your information with the credit bureaus.
Make your credit payments on time.
Paying your bills on time is more than just proper financial management … it’s also about maintaining your credit score.
Keep your credit card balances on the down low. Literally.
Don’t increase your available credit by opening a bunch of new cards.
Your credit score will fall if you do this. This is because your available credit will increase. Too much available credit makes lenders nervous.
Be smart and take things slow and steady.
A good credit score is anything above a 620, but that score means that you’re responsible with your credit.
If you take things slow and steady, it can be easy to build a great credit score in 2 years.
At the same time, it’s critical to be responsible with your credit, and a credit score under 600 means you’re not responsible with your credit. I’d say your first goal is to get your score up to 650 or so and keep it there, because you want to be getting the best rates and terms available.
Remember, Credit scores are a moving target
What counts as a good score can vary depending on which two credit reporting agencies you ask. Equifax and TransUnion have different standards.
According to Experian, a good credit score is one that is at least 660, but internal credit score standards at Experian range from 620 to 730. A great credit score is anything higher than 760, according to Experian.
Experian claims 68% of U.S. consumers have a credit score between 750 and 800 – the range considered to be excellent. In addition to delving into how the agencies define good credit scores, Experian also gives advice on what it takes to achieve a good score:
Order your credit reports and review your scores regularly to catch any billing errors as soon as possible.
Check your accounts regularly to ensure no one else has opened an account using your personal information.
Collect credit card purchase receipts and keep them in a safe place to help verify your identity if someone tries to open an account in your name.
Use credit wisely, and always make your payments by the due date.
Keep your total credit card balances to less than 30% of your total credit limits.
When it comes to credit scores, we have all heard about the importance of keeping the score high. But many of us are often confused about what exactly makes a good score.
In this post, we have looked at the different reasons why people go looking for credit scores. Then, we looked at how to interpret a credit score and we identified some of the factors that affect your score. We also looked at techniques you can use to improve your score.
Finally, we looked at the trends and statistics of credit scores in the US based on a study by the Consumer Federation of America. Knowing what makes up a good credit score gives you a better idea of what you should and shouldn’t be doing to improve your score.
Your credit score isn't just a number on a page. It impacts your financial future and is used by lenders to judge your creditworthiness. Lenders use it to see if you can afford to take on a loan and how trustworthy you are when repaying it. This determines what interest rate they are willing to lend you money at, or if you are approved at all.
But what actually determines your credit score?
The most well-known credit score system was devised by Fair Isaac Corporation, also known as FICO. The latest version of the FICO credit score is called FICO 8, which is a number between 300 and 850.
The higher the score, the better. Always. Because, it means that you have an excellent credit history.