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What is a Credit Score, and What Are the Credit Score ranges?

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What Is a Credit Score, and What Are the Credit Score Variables?

Credit scores estimate your likelihood of repaying new debt. Scores above 690 are generally considered good credit.

By Bev O’Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O’Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She has a bachelor’s degree of journalism at Auburn University and a master’s in education from Georgia State University. Before coming to NerdWallet, she worked for daily newspapers, MSN Money and Credit.com. Her work was featured in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and many other places. Twitter: @BeverlyOShea.

as well as Amanda Barroso Lead Writer | Credit scoring, budgeting and personal financial planning Amanda Barroso is a personal financial writer and has joined NerdWallet in 2021 to cover credit scoring. She has also written research studies and participated in the NerdWallet’s «Smart Financial Decisions» podcast. Before joining the team, Amanda spent more than a decade covering issues facing the majority of Americans including writing for the Pew Research Center and a policy analyst for the National Women’s Law Center and a professor at the college level. Amanda received a doctorate degree from The Ohio State University.

3 February 2023

Edited by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Her previous experience includes editing copy and news for various Southern California newspapers, including the Los Angeles Times. She received a bachelor’s degree in journalism and mass communications from the University of Iowa.

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Credit scores influence all aspects of your life. For instance, whether you get a loan or credit card, what interest rate you pay, or whether you obtain the apartment you’ve always wanted.

An improved credit score could allow you to access greater credit options — and at lower interest rates. People with credit scores that are higher than 750 or so frequently have many options, including the possibility of being eligible for no-interest financing for cars and credit cards with 0% introductory interest rates.

It’s important to know the process of credit score and what the ranges of credit scores are.

Find out how your credit is scored

Check your score for free and the factors that influence it, plus tips on how to build your score.

How do you calculate a credit score?

The credit score can be described as a 3-digit number, generally on the scale of 300-850. It indicates how likely you are to repay borrowed money and pay off bills.

Credit scores are calculated based on information about your credit accounts. This information is gathered by credit reporting agencies, often known as, and then compiled to create your credit report. The three biggest agencies include Equifax, Experian and TransUnion.

You don’t have one credit score — you have several which may differ little. It’s because two big companies calculate scores; more about that later.

The best credit score you can get is 850, although there’s no difference between an «perfect» score as well as an excellent score in terms of the rate and the types of products you are eligible for. That’s why you shouldn’t worry about trying to get an 850 credit score, particularly since scores fluctuate often.

What are the ranges of credit scores?

Creditors establish their own standards for the scores they’ll accept However, these are the general guidelines:

Any score that is greater is usually considered to be a good score.

A score of 690 to 719 will be treated as .

Scores between 630 and 689 are .

And scores of 629 or less are

Alongside your score on credit, other aspects such as your income and other debts can be a factor in creditor decision-making on whether to approve your application.

What is the distinction in FICO score and VantageScore?

Two companies dominate credit scoring. The most well known score. Its main competitor is the . In general, both companies have the credit score range of 300-850.

Each company has several different versions of its scoring formula, too. The scoring models used the most frequently tend to be VantageScore 3.0 and FICO 8.

FICO and VantageScore draw from the same data, weighting the information in a slightly different way. They usually work in tandem If you have an excellent VantageScore score, your FICO score is likely to be high too.

What is the reason My FICO score, and VantageScore different?

A score is a snapshot and the number can vary each time you check it. Your score may differ based the credit bureau that provided the credit report data used to create it, or even when the bureau provided it. Each creditor may not report account activity to the three bureaus, and so the credit reports from every one is unique.

What is the average credit score?

The score in the United States varies a bit between the two scoring models.

The average FICO 8 score of 716 at the time of August 2022, exactly the same as one year ago. (0) FICO Decisions Blog . . Accessed Aug 30, 2022.

Its VantageScore 3.0 average was 695 at the second quarter of 2021.

What factors impact how your scores on credit?

The two main scores for credit, FICO and VantageScore, take into account the same variables, yet weight them slightly differently. In both scoring models, the two things that matter most are:

Paying bills on time. An error here could be costly. A payment which is 30 or more days over the due date will remain on your credit record for years.

What you have to pay. Credit utilization, or the amount of your credit limit have used, can be considered almost as heavily as paying on time. It is recommended to limit your use to less than 30 percent of your credit limits which is lower than the average. There are several steps you can take to help Scores react rapidly to this aspect.

A lesser amount of weight is given to these factors However, they’re important to keep an eye on.

The more time you’ve had credit and the higher you’re able to judge the age average of your credit accounts the better your credit score.

Credit mix Credit mix: Scores reward the ability to have more than one type of credit, such as an ordinary loan as well as a , for example.

How recently you have been approved for credit: When you make an application for credit it could result in a temporary dip in your credit score.

The factors that affect your credit score

There are some things which aren’t considered in credit score calculations The majority of these have to do with demographic factors.

For instance, your race or ethnicity, sexual status, or age don’t count as considered in the calculation. The same goes for your employment background — which could include things such as your salary, title or employer -or the place you reside.

How can you improve your credit score?

What is your credit score indicate? In one word that is creditworthiness. What does this really mean? Your credit score is a way to gauge your financial behavior. The factors that are incorporated into your score can also provide solid ways to increase your score

Pay all charges at the time they are due.

Keep credit card balances under 30percent of the limit, and ideally much lower.

Make sure you have old credit cards in your account to ensure the age average of your accounts. Also, consider having a mix of installment loans.

Spread out credit application forms instead of applying for many in a short time. Typically, lenders will initiate a «hard pull» of your credit whenever you make an application, which will temporarily affect your credit score. Too many applications too close together could cause further damage.

There are several methods to use when you’re starting out and ways to once it’s established. Making payments on your balances of credit cards a few times during the month or asking for greater credit limits can boost your score.

How can I verify and monitor my credit?

You can look up your personal credit score — it’s there- and know what the lender is likely to look at.

It is possible to obtain one through a personal finance website such as NerdWallet, which offers a TransUnion VantageScore 3.0. Some personal banking apps offer credit scores at no cost which means you can create a a habit of checking in whenever you log in to pay bills.

It’s crucial to use the same score each time you check. If you don’t, it’s like trying to track your weight using different scales — or possibly changing between kilograms and pounds. Therefore, choose an appropriate score and create a game plan to monitor your credit. The changes made by one score are likely to be evident in the other.

Keep in mind that, as with weight, scores can fluctuate. So long as you maintain an appropriate range, those variations won’t have an impact on your financial wellbeing.

You can help protect your credit by contacting each credit bureau. It is possible to continue using credit cards, however nobody can make credit applications using your personal data because access is restricted in the event that your credit has been frozen. The process of freezing your credit is completely free and takes only a few minutes but it will go quite a ways in protecting your financial security.

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Authors’ Bio: Bev O’Shea is a former credit writer at NerdWallet. Her work has been featured in publications such as the New York Times, Washington Post, MarketWatch and elsewhere.

Amanda Barroso covers consumer credit and debt for NerdWallet. She previously worked at the Pew Research Center and earned an honorary doctorate from The Ohio State University.

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