How Credit Score Ranges Impact Your Ability to Borrow

Of all the financial subjects you think about, I’m guessing “credit score ranges” may not be top of mind for you. But understanding how credit scores are grouped together gives you a better idea of how lenders view you when it comes to risk as a borrower.
The credit score range you fall under impacts a variety of financial scenarios you’ll face as you’re adulting. Your range not only signals to lenders how risky of a borrower you are, it also influences how much interest you end up paying or even the apartment you’re able to rent.

Calculating your credit score

Calculating your credit score is a complex subject, but like credit score ranges, it’s helpful to have a basic understanding.
The three major credit bureaus — Experian, Equifax, and TransUnion — are the credit reporting agencies responsible for adding information into your personal credit report.
This information is then used to calculate your personal credit score. There are two widely-used credit scoring models for this — FICO and VantageScore.
FICO is short for Fair Isaac Corporation. This is the score used by 90% of lenders to determine your credit rating when applying for loans and credit. Under the FICO umbrella, there are several different credit score calculations, but the most common calculation used by lenders is the FICO8 and FICO9.
VantageScore is another popular calculation and is used by numerous lenders, as well as tenant screenings. The VantageScore3.0 is one of the scoring models used the most under the VantageScore umbrella.
Each scoring model has its own proprietary method for calculating your score. While the calculations are based on top-secret algorithms, you can get the general idea of each one.
Your FICO score takes into account the following:
  • Payment history (35%): Think of this as your track record for making payments.
  • Credit utilization (30%): How much of your available credit you’re using.
  • Length of credit history (15%): The number of years you’ve
  • New credit (10%): How often you apply for and open new accounts
  • Credit mix (10%): The variety of credit products you have includes credit cards, installment loans, finance company accounts, mortgages, etc.
Whereas your VantageScore3.0 may look more like this:
  • Extremely influential: Your payment history
  • Highly influential: The types of credit you have and percent of credit limit used
  • Moderately influential: Total balances
  • Less influential: Available credit, recent credit behavior, and number of inquiries
The bottom line is, your score varies based on the calculation being used. While you can obsess over the exact number, a more helpful tool may be understanding the general range your score falls under.

Credit score ranges

Your credit score is calculated each month, so you’ll notice changes to your score on a regular basis. To make it slightly more confusing, the ranges vary somewhat when comparing a FICO or a VantageScore.
Here’s a high-level overview of the range categories for the two major calculations. Then, we’ll get into what each range means for you and your borrowing goals.
FICO
  • Very poor: 300 to 579
  • Fair: 580 to 669
  • Good: 670 to 739
  • Very good: 740 to 799
  • Exceptional: 800 to 850
VantageScore
  • Very poor: 300 to 499
  • Poor: 500 to 600
  • Fair: 601 to 660
  • Good: 661 to 780
  • Excellent: 781 to 850

What each credit score range means for borrowers

What exactly do each of these mean for you as you seek borrowing opportunities? Here’s what to expect from each category.

Exceptional

If your credit score falls between 800 to 850 for FICO and 781 to 850 for VantageScore, then you are considered an exceptional borrower. Borrowers in this range are most likely to experience easy approvals when applying for a loan or credit. This also means exceptional borrowers receive the lowest interest rates and the least amount of fees.
Those within this range have no issues qualifying for credit and have the easiest time with the lending process. Plus you’ll have your choice of which premium credit card offer you want to take advantage of.

Very Good

If your FICO score is between 740 to 799 then it’s considered Very Good. You should note, VantageScore does not have a range with a Very Good designation. Borrowers who fall in this range won’t have issues with approval. They often qualify for better interest rates on loans and credit cards and generally have an easier time with the entire loan process.

Good

A score of 670 to 739 falls into the Good category. This is slightly different for VantageScore, where the Good range is 661 to 780. If your score is within this range, you are close to the national average. The current FICO average for Americans is 701.
Lenders consider a score in this range as an acceptable borrower and should qualify for most loans and credit cards. However, this credit score range means you’re more likely to have a higher interest rate than a borrower with excellent credit.

Fair

FICO scores that range from 580 to 669 fall into the Fair range. The VantageScore Fair range is 601 to 660. It’s possible if you fall into this range that you will be turned down for a loan or be considered a subprime borrower. For consumers who are approved for credit or loans within this range, the interest rate will be significantly higher than the Good, Very Good, or Exceptional categories.

Poor

VantageScore defines a Poor category, whereas FICO does not have one with this label. If a VantageScore credit score is between 500 to 600, then it is considered poor. If your credit score falls into this range, you should expect to pay the highest interest rates and it’s possible you’ll be turned down for credit.

Very Poor

A FICO score in the range of 300 to 579 is considered Very Poor. It’s not unusual for a score in this range to have a bankruptcy or other major credit problems on the credit report. With a score in this range, most lenders will deny a loan or credit application.
If you’re applying for a credit card and you do fall in this range, your best option is a secured credit card. A secured credit card makes you put down a security deposit equal to the amount of your spending limit. This is likely the only credit card a score in this range would qualify for but could help you improve your credit and give you an option for a card.
Additionally, if you’re putting utilities in your name with a Very Poor credit score, then a deposit is required.

How the scoring model affects your credit score range

As you can see, it’s a little more complicated than you might expect when it comes to calculating a credit score. And the score calculated by VantageScore could put you in a different category than the same FICO score.
Each lender has its own set of criteria and standards when making decisions about credit. And what one lender considers Very Good, another lender may label as Good.
What’s important to remember is a few points can make a big difference. If your FICO score is 668, then you technically fall within the Fair category. A few more points and you get bumped up within the Good category, and you have more borrowing options available. You also pay less in interest when you’re approved for lower interest rates.

How to improve your credit score range

No matter if a lender uses FICO, VantageScore, or if you’re unsure what range you fall into, your best approach is to be proactive with your credit score.
If you’re worried your current credit score range may put you in a less than favorable position for obtaining credit, the good news is you can take actionable steps to improve. Like other financial choices, it takes work. But your hard work pays off with an improved score.
  • Pay your bills on time: Lenders love to see borrowers who pay their bills on time each month. Avoid late payments and watch your credit score improve by paying your bills consistently on time.
  • Keep your credit utilization low: Credit utilization is the ratio of your available credit versus the amount of credit you actually use. So if you have a $10,000 credit line, but you only have a $500 balance, then your utilization is low. This shows lenders you’re responsible for your borrowing.
  • Obtain a secured credit card if necessary: If you need help rebuilding your credit, a secured credit card can help. It keeps your spending in check while using the card and limits your credit risk.
  • Make credit monitoring a priority: You are guaranteed three free credit reports each year - one from each of the major credit bureaus. To request a copy of your report, go to annualcreditreport.com. You can also obtain your free credit score from many of the credit card companies or your bank or credit union. When reviewing, look for discrepancies in your report and clean up any mistakes as quickly as possible.
  • Keep a mix of credit: Although not as important to your credit score as other factors, having a mix of credit can raise your score. This means using different types of credit, such as installment loans, credit cards, and mortgages.
  • Consider boosting your credit score: Programs such as ExperianBoost and TransUnion’s eCredAble Lift can improve your overall credit score. These programs synchronize with your bank account to look for regular monthly payments you make for utilities. There are other similar programs available that do the same for rent payments. If you pay these regularly, using one of these credit boosting programs could give you a higher credit score and bump you up into another range.
Another important part of improving your credit score is to keep an eye on inquiries. Every time you apply for a form of credit, an inquiry is made by the lender and it shows up on your credit report.
  • A hard inquiry is when a lender thoroughly examines your credit report, such as when you apply for a card with the credit card companies or apply for a loan. You have to give permission for a hard inquiry.
  • A soft inquiry is more of a routine check, and a company can perform it without your permission.
Try to limit the number of inquiries because your credit score is impacted by each one, although some inquiries “fall off” your report faster than others.

The bottom line

Understanding how lenders view your credit and the credit score range you fall under helps you navigate through various lending situations. While the score calculations are quite complex, there are basic principles you can follow to put yourself in the best credit position possible.
While your credit score does not define you as a person, it does impact your ability to experience big moments, such as buying a house or a new car. By understanding your credit score range and how lenders view you as a borrower, you can better understand what to expect when going through the lending process.
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