When it comes to credit scores, the whole thing can seem mysterious. What goes into your credit score, what hurts your score, and maybe most importantly whats a good credit score are all important questions.
Whats a Good Credit Score Anyhow?
Before we get into the actual scores, it’s important to know that there are three major credit reporting agencies and two major scoring systems. All three of these agencies use slightly different score ranges, and how they determine their scores are different for each agency as well.
Credit Reporting Agencies
The three major credit reporting agencies are Equifax, Experian, and TransUnion. They have the following credit score ranges. The higher the credit score the better.
|Experian||330 – 830|
|Equifax||300 – 850|
|TransUnion||300 – 850|
Credit Scoring Systems
The two major credit scoring systems are FICO and VantageScore.
FICO and VantageScore scores are used by most lenders to help determine whether or not to approve loans or give credit. Keep in mind, these scores are only one part of the equation as most lenders also use their own custom scores to help make their lending decisions.
These custom scores are secret, so you’ll never know exactly what your credit score is for one specific lender.
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FICO and VantageScore scores fall into these categories:
|750 – 850||Exceptional|
|700 – 479||Good|
|650 – 699||Fair|
|550 – 649||Poor|
|300 – 549||Bad|
If you fall in the good or exceptional range you will be able to get good interest rates, with those in the exceptional range getting the very best rates.
Those that fall into the fair range will be able to obtain credit but will pay a little higher interest rate, and those in the poor category will see their interest rates go very high.
For those in the bad category, you might not be able to get any credit and if you do the interest rates will be sky high. You might also have to pay deposits for utilities and cell phones. If you do fall below the exceptional range, you might want to check out the additional resources you’ll find below. While the agencies have different ranges of credit scores, whats a good credit score is pretty much the same for all three.
How FICO and VantageScore Determine Their Scores
When it comes to determining whats a good credit score, these two major scoring agencies go about it a little differently. These differences can mean a difference in your actual credit score number that is used by each of the major credit reporting agencies.
There are several differences that you should be aware of:
1.Late payments – While a late payment is always going to be a major black mark on your credit score, VantageScore’s sees different types of late payments as more or less meaningful. For example, they will give a larger penalty for a late mortgage payment than for a late credit card payment.
FICO, on the other hand, sees all late payments as equally bad.
2. Collections – If you have a credit card, for example, that has a really low balance that ends up in collections and then you eventually paid it off, FICO will not include it when they are calculating your credit score.
VantageScore ignores all collections that have been paid no matter what the dollar amount is. This is a big advantage for you.
3. Hard inquiries – When you are looking for credit, chances are you apply at more than one place, so you can get the best rates and terms. Every time you do, this causes an inquiry into your credit report. These are called hard inquiries and cause your credit score to drop by a few points.
VantageScore will ignore duplicate inquiries but only if they happen within a two week time period. FICO will ignore these duplicate inquiries for up to 45 days.
There are many large and small things you do and don’t do that can have a major impact on your credit score. So, when it comes to whats a good credit score, if your score isn’t what you’d like it to be, you can work to improve it, and that’s the good news.
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