Credit Score Scale: What is a Good Credit Score?

Credit Score Range You know that your credit score is one of the most important bits of financial information about you.

Where you fall on the credit score scale is often considered to be a way of determining what kind of person you are when it comes to managing your money.

Lenders — and plenty of others — use your position on the credit score scale to make decisions about how they will treat you in money matters.

The only problem is that many of us don’t know what our credit score is.

And when you head to one of those sites to get your “free credit score” it’s really not free AND it’s not your real credit score.

I found this out the hard way when I was trying to find my real FICO credit score.

If you’re just as confused as I, here’s a quick look at determining your credit score scale.

What is the Credit Score Scale?

When most of us think of credit scoring, we think of the FICO score, put out by the Fair Isaac Corporation.

This credit score ranges between 300 and 850, with 300 representing the lowest possible credit score.

However, it is important to realize that this is not the only credit score available.

Other companies use variations of FICO’s formula to create their own scores. Additionally, there are companies out there that have created their own credit score scale altogether. However, for the most part, you are likely to run into some version of credit scoring that uses a model similar to the FICO score. (Non-FICO scores are commonly referred to as FAKO scores, but they can have some use which I’ll explain in a moment.)

The point of the credit score scale is to allow lenders and other financial services providers (like insurance agents) to immediately ascertain whether or not you are a credit risk. If you have a low credit score, then service providers, like cell phone companies, and even a potential employer, might make assumptions that your level of financial responsibility is low, and that you might prove irresponsible in other areas as well. Clearly, lenders view a low credit score as something that increases the chance that they won’t be repaid the money they lend.

Your position on the credit score scale is usually figured by using a formula that takes into account the following information (and I’ve included how much emphasis your FICO score places on each):

  • 35% Payment history on loans and credit cards.
  • 30% How much of your available credit you are using.
  • 15% Length of your credit history.
  • 10% Recent credit inquires.
  • 10% The types of debt/credit that you have.

It is important to realize that, even though lenders see your credit score as a big piece of the puzzle, they may also look at other items, such as your income and your employment history, when making a decision.

FAKO vs. FICO Scores

Your FICO score is the one that everyone wants to know: home mortgage lenders, the car loan officer at your credit union, and even your car insurance company looks at some variation of your FICO score. Unfortunately you have to purchase access to your FICO score from myFICO unless you apply for a loan and can get the lender to tell you what your score was.

That having been said keeping track of your FAKO score can still be beneficial. It won’t be as accurate as the FICO score your lender is looking at, but you can track the ups and downs of your score by using a FAKO score. Any significant increases or decreases in that score would be an indicator to check things out on your FICO score.

The most popular FAKO scores include: Vantage Score (a partnership among all three credit bureaus that scores on a 500 to 900 scale), TransUnion’s TransRisk (scored on a 300 to 850 scale), Equifax’s Score Card (scored on a 280 to 850 scale), and Experian’s Scorex PLUS (scored on a 360 to 840 scale).

As you can see there are several popular FAKO scores and several credit score ranges. This can lead to a lot of confusion as you try to keep track of your score and determine whether or not you have a good credit score.

What is a Good Credit Score Range?

For the most part, a good FICO credit score depends on the current market conditions. Prior to the financial crisis, a 680 was considered good enough to get a good interest rate on many loans. Now, many lenders want to see a score of at least 720 to offer you the best deal.

Generally, though, a credit score below 600 is considered quite poor. If you score between 650 and 699, you are considered to have be in the fair to good range. Some won’t have a problem with you when you have a score of between 620 and 700, but you probably won’t be offered the best terms. A good credit score can mean more than just a good interest rate on a loan: It can also lead to lower insurance premiums and the ability to qualify to move into a better rental.

A good FAKO credit score varies based on the score you are using. Each score has its own scale which can make comparing it to a true FICO score challenging. It still holds true that the higher the number, the better your score is. Most of the FAKO credit scores will show you their version of your credit score on a scale in order to show where you fall in the range of excellent to poor credit.

How to Monitor Your Credit Score

So I’ve convinced you that keeping track of this number is important? Great!

I bet you’re thinking, “But wait… what exactly is the best way to track my credit?

Don’t worry. I’m going to make this as easy as possible for you.

Free Resource #1: AnnualCreditReport.com

Getting a copy of your credit report used to be difficult. Now it is easy as a few clicks of your browser thanks to the government. The government forced the three credit bureaus to give consumers access to a free credit report from each bureau once every 365 days through a website called AnnualCreditReport.com.

This is just your credit report. When you log in you won’t be able to see your full credit score. However, this is a great starting point because you can look for errors or unfamiliar accounts that might indicate identity theft.

Always start with checking one of your reports at AnnualCreditReport.com.

Note: You get one free report from each bureau every year. You do not — and should not — have to get all three free reports at the same time. The best strategy is to check only one report from one bureau every 4 months. You check TransUnion today, Experian in 4 months, and Equifax in 8 months. This gives you a very basic version of credit monitoring. And don’t worry, the bureaus are required to talk to each other if something happens on your report so you’ll have updated information no matter which bureau you are pulling from.

Free Resource #2: Companies That Monitor FAKO Scores For You


Completely Free Credit Score
With so many popular FAKO credit scores out there it can be hard to keep tabs on them. Yet having a snapshot of the ups and down of your credit report — even if it isn’t a true FICO score that a lender will look at — is a good thing.

My two favorite companies to track my scores are Credit Karma and Credit Sesame. Each company will track a credit score for you for absolutely free. Unlike other websites that say they are “free” but hit you with monthly membership fees, Credit Karma and Credit Sesame are both absolutely free. (They make money in other ways like offering you a better deal on your mortgage or credit card.)

Here’s a quick comparison of the two:

  • They are both free to join.
  • They both offer a free credit score.
  • Credit Karma offer’s access to three different scores: TransUnion’s TransRisk, your Vantage Score, and an auto insurer score.
  • Credit Sesame offer’s access to Experian’s Scorex PLUS credit score.
  • Credit Karma lets you update your score daily. Credit Sesame does the update monthly.

Either option is a great place to start, but Credit Karma seems to have more options. Whichever route you go being able to keep track of the ups and downs of your credit score is a smart financial move. (Or better yet use both services since they are free and track two different versions of your score each month.)

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Comments | 4 Responses

  1. says

    Did you know that your credit score can even affect your car insurance rate? A year ago mine was affected and I called the insurance company and asked them why my monthly bill went up. They pulled my credit score and I found that it has dropped :(

    However, as soon as I started paying my bills down and left my cards open I noticed an increase in my credit score. My insurance went back down to normal after 6 months.

    Garen

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