Credit Score Scale: What Is a Good Credit Score?

Planning to purchase a car or a house? Have you checked your credit history? If the history is bad, it is wise to repair it before approaching banks and other financial institutions for any form of loans. You will get loans nevertheless, but the down payment and the rate of interest would be high. Hence, it is advisable to check your credit score constantly and amend the credit history by improving the credit score. A good credit score will make it easy for you to get loans at better rates.

What is a Credit Score?

The credit score plays a crucial role in determining whether you are eligible for any kind of loans. The companies that issue credit cards will check your payment history on credit cards of other companies before issuing the same. Your credit eligibility is calculated to derive a credit score. Many people are ignorant about how the credit scores are calculated and also the criteria that are taken into consideration while preparing the credit report.

Credit Score Scale

A credit score can range anywhere between 300 and 850. A credit score that is below 500 is considered as risky by the lenders and financial institutions. 850 is the high score and 300 is the low score. If the credit score is 700 and above, you have better chances of getting loans at good interest rate. Credit score scale is the scale that gives the range of credit score. Various bureaus, using special formulas, calculate the credit score. You can get your credit reports from any of the authorized bureaus. However, FICO is more popular than others.

The Fair Isaac Corporation or FICO is one of the credit bureaus that scale or measure the credit score. Their scoring system is called VantageScore. FICO score-range is between 300 and 850 points. According to the FICO credit score scale, the scores that are above 720 points are the best while the points beneath 600 is considered to be a bad score. The credit scores between 600 and 700 come under average scale.

Before applying for loans it is advisable to get the credit report from any of the bureaus. However, understand that credit scores are not a part of the credit report. The financial institutions will analyze the credit scores on the basis of the credit report you submit for a loan. The credit scores are calculated by the credit bureau.

Good Credit Score

Various financial institutions use different credit scoring systems with different numeric scales. Therefore, the lender decides whether a credit score is good or bad. The financial institutions decide on the credit score on the basis of your credit report and credit history. However, it is suggestible to find out whether your credit scores are good by getting a VantageScore and a VantageScore Report.

The grading scale used by the VantageScore is A, B, C, D, and F. A is the highest score in this scale ranging between 901-900. F is a bad score in this scale, ranging between 501-600. It is a general belief that if you have a good VantageScore, the other credit scores are bound to be good.

It is unlikely that anybody will get a "perfect" credit score. The reason is if you have a credit, then there is likely to be some risks. This will be reflected in your credit score. Keep in mind that the lenders will not look out for the perfect score. They would want only a good credit score.