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 loan. 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 score. A good credit score will make it easy for you to get loans at better rates.

What is a Credit Score?

Credit score plays a crucial role in determining whether you are eligible for any kind of loan or not. 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 are also unaware of 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 risky by lenders and financial institutions. 850 is the highest score and 300 is the lowest score. If the credit score is 700 and above, you have better chances of getting loans at good interest rates. Credit score scale is the scale that gives the range of the credit score. Various bureaus calculate the credit score using special formula. 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. 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 are considered as bad scores. Credit scores between 600 and 700 come under average range. On the other hand, the VantageScore is a credit rating product used to compete with FICO. The grading scales of FICO and VantageScore differ from each other.

Now, you may be wondering how exactly is the credit score calculated? Well, there are several factors that are involved in the calculation and points allotment. For e.g., issues like late payments, bankruptcies, defaulted payments, number of open accounts, payment history, credit inquiries, utilization, etc., affect the credit scores scale. Data or scores differ from bureau to bureau because each bureau has its own way of deciding the importance of each of the above mentioned factors. 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 institution will analyze the credit scores on the basis of the credit report you submit for a loan. Credit scores are calculated by the credit bureaus (Experian, Equifax, TransUnion)

Good Credit Score Scale

Various financial institutions use different credit scoring systems with different numeric scales. For e.g., the credit score scale of FICO is 300 to 850; whereas that of the VantageScore is between 501 to 990. Therefore, the lender decides whether a credit score is good or bad. The financial institution determine the soundness of your credit score on the basis of your credit report and credit history. However, it is suggested that you find out whether your credit scores are good by getting a VantageScore Report. So, what is a good credit score scale?

Good credit score according to VantageScore is between 900-950. The grading scale used by the VantageScore is A, B, C, D, and F; where 'A' is the excellent credit score, while 'F' is a bad score in this scale, ranging between 501-599 and below. On the other hand, the perfect credit score according to the FICO scale is between 700-850. It is a general belief that if you have a good VantageScore, the other credit scores are bound to be good.

It is unlikely for anybody to get the "perfect" credit score. The reason is if you have a credit, then some risks are definitely possible. 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.