Credit Score Scale

The credit score is a derivation of credit ratings, credit history and credit reports. These three parameters are considered while calculating a persons credit score. Credit reporting agencies follow specific mathematical formulas in order to derive the final score. The most common mathematical model that is used to derive such scores is the FICO Score model. Every bank, lender, credit card company, lending institution and financial institution follows a credit score guide.

The FICO score model includes 5 important elements while deriving the score. 35% of the score is payment history which is the first element and consists of information about your past payments. Timely payment has a positive effect on the entire score. The second element is the amount that is owed as of date which accounts to 30% of the score. Too may accounts that are owed result into a negation of credit score. The third aspect is the length of the credit history and contributes to 15% of the score. A long history is down right negation of credit history. 10% of the score is made up of new borrowings. The last 10% is contributed by the different types of credit.

FICO credit rating score is basically a numerical between 600 and 850. The credit scale, when arranged in an ascending manner gets segregated into 6 different classes with the poorest score beginning from 600 and the best score being 850. This score is principally used to derive interest rates, terms and conditions of the loans and is also used as a primary guideline in the process of approval of loan, credit card or a debt creation facility.

Credit Score Scale

If you go on the web, you will find a considerable number of credit score ratings such as good credit, bad credit and poor credit. These are the categories of scores that are used by lenders and credit card companies, to decide the approval and interest rate of a credit related facility. The following chart will give you a brief idea about the significance of these categories.

Credit Score	Rating
760 to 849	Excellent Credit
700 to 759	Great Credit
660 to 699	Good Credit
620 to 659	Fair Credit
580 to 619	Poor or Bad Credit
500 to 579	Very Poor Credit

These categories help the reporting agencies, lenders and credit card companies to comply with Fair Credit Reporting Act, Equal Credit Opportunity Act, Fair Credit Billing Act and Fair Debt Collection Practices.

There are certain implications of these categories. A very poor score means that you have a staunch possibility of facing denial for loans and credit cards. Poor credit means that you will be subject to higher levels of interest. The poor credit and very poor credit categories are deemed to be bad credit categories and people who have such scores can avail bad credit loans. A fair score has a good chance and priority in getting loans. The people belonging to the good and great score can not only avail loans and credit cards quickly but also have the advantage of lower rates of interest. The best score category is of course the excellent credit which is deemed to receive the best rates of interest and almost instant approval.

The credit score ratings scale is used for all your credit and loan related services, hence better your score, the lower is the rate of interest.