Credit scores range from a low of 300 to a high of 850 for both FICO and Vantage Score rankings. The companies that determine credit scores don’t label specific scores as good or bad. Even credit reporting agencies merely review the current market for an idea of what constitutes a “good” or “bad” credit score. Generally, what is truly an acceptable score is determined by individual lenders and insurance companies, as they are the ones taking the risk.
Credit scores help lenders determine whether they will issue a loan and what interest rate they will place on it. Insurance companies use these rankings to decide whether they will discount an insurance policy and by how much. The lower a person’s score, the riskier they seem to lenders and insurers. That means they will be less inclined to work with someone of a lower score.
The Rankings
While the decision is up to the individual lender, there are widely accepted credit score rankings. Some scores are generally accepted as good or bad. Scores from 850-760 are considered great, from 760-680 are good, from 680-620 fair, and anything below 620 is considered a bad credit score. Of that lower tier, 580-619 is not as bad, lenders may still work with you, but the interest rates may be high. From 500-579, there will be few options for credit, and what you do find will have high interest rates and upfront fees. Anything below 500 is considered terrible and lenders will assume you’re financially irresponsible.
Reviewing Your Score
The first step to understanding your credit is reviewing it. Some credit reporting companies will offer a one-time free glimpse at your credit, while others will track it for you each month and notify you of any changes. This allows you to keep an up-to-date record of your credit’s health. A credit report will contain information on your accounts so you can identify and even challenge any errors.
Improving Your Score
Making your payments on time is the quickest way to raise your credit score. Late payments will lower it, so setting up payment reminders, or even automatic bill payment, will prevent your credit score from suffering due to a late payment. Keep in mind, however, that automatic payments usually only cover your minimum payment, and minimum payments don’t persuade lenders of your financial reliability.
Another major factor in your credit score is how much you owe. That is why you should make whatever efforts you can to lower your debt and try to incur as little debt as possible. This, combined with timely payments, will raise your score and reassure lenders or insurers viewing your credit report that you can make your payments each month.
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