What is a Good Credit Score Rating

You are probably aware of the importance of credit in today's financial scenario. As a result, you must learn what is a good credit score rating. Almost every financial dealing that you undertake will involve credit in some manner. Hard, liquid cash is obsolete and credit worthiness is what helps lenders decide how much credit to extend and to whom. This reality has brought out the need for a universally accepted and standardized means of evaluating a person's credit worthiness.

Development
FICO (Fair Isaac and Company) is the organization that came out with a novel method for calculating an individual's credit worthiness and thereby begun the process of its standardization by developing a credit score rating chart. FICO developed a software that allowed companies to evaluate a person's credit history, keeping in mind a multitude of parameters, and as a result, assign a number that denoted the risk involved in extending credit to that particular person. The number on this credit score rating chart can range between 300 and 850. The lower the number, the greater will be the risk in extending credit to that person and therefore, he/she will be charged a higher rate of interest. This is the defining principle behind understanding what is a good credit score rating. The three main credit bureaus - Experian, TransUnion and Equifax, adopted this rating system developed by FICO, and at present, this is the commonly accepted measurement of an individual's credit worthiness.

Factors Considered for Credit Score Ratings
Credit rating scores are independently calculated by various lenders. Some lenders may choose to calculate your credit score ratings based on their own methods, even though the FICO score is widely regarded as universal. Your credit score rating will be an independent entity and it is completely different from your credit history or your credit report. These are the various factors that a lender may take into consideration in order to calculate your credit score.

• Payment History: Your entire history of payments is studied and your ability to repay loans at the right time is carefully analyzed.
• Amounts Due: Your payment history would be incomplete without comparing it with the total amount that you are due to pay.
• Length of Credit History: The more amount of time that you have been extended credit to, in the past, aids in the decision-making process for the present.
• Types of Credit: This is where your credit portfolio and credit mix come into the picture. The more diverse your credit portfolio, the greater will be your score.
• New Credit: The greater the amount of new credit that you acquire in a short period of time, the more suspicion you arouse. This will negatively affect your credit score.

Credit Report
As mentioned earlier, your credit report and your credit score ratings are two separate entities. Credit score ratings will always be calculated on the basis of your credit report. The credit report is simply a record or a journal of your past dealings involving all forms of credit. Your entire credit history will be chronologically listed in the credit report. What is a good credit score rating without an impressive credit report to back it up.
Note that bankruptcy will be visible on your credit report for a period of ten years, and most of the times, your credit report lists out details of the last seven years. Each of the three credit bureaus own a copy of your credit report and individually derive your credit score. As a result, you may have three separate credit scores. Some of the details that are easily accessible on your credit report are

• Bankruptcy
• Payment History
• Credit Inquiries
• Credit Utilization
• Current Credit Accounts

What is a Good Credit Score Rating?
Now the question that arises as a result of all this is what is a good credit score rating? Since the methods of devising a good credit score range differs with each of the credit bureaus, it is impossible to lay down a rigid structure of credit score ratings. But assuming that your credit score is based on the FICO scale, a certain structure or a credit score rating chart can be devised.

Credit Score	Relevance
500 - 579	Extremely poor score. Availing a loan will be near impossible, and even if one does manage to, it will be at an exorbitant rate of interest.
580 - 619	Poor score. You will get the loan but at the highest rate of interest.
620 - 659	Average score. You will get the loan but at a relatively high rate of interest.
660 - 699	Above average score. You will get the loan at a reasonable rate of interest.
700 - 759	Good score. You will easily manage to get a loan at a low rate of interest.
760 - 849	Excellent score. You are completely creditworthy and will receive the lowest interest rate possible. Read more about the highest credit score possible.

The importance of understanding what is a good credit score rating and how to be placed in a good credit score range is something that you must be completely aware of. Read more on ways to improve credit scores. Whenever you approach a bank or any financial institution for a loan or for some form of credit, it is your credit score that will determine the rate of interest to be charged. By extending credit to you, the lender is exposing himself to some form of risk. Thus, the lender needs to substantiate that risk in some manner. A person with low credibility is a higher risk for the lender, and so he is charged a higher rate of interest.