Using the FICO Scoring model, a credit score between 800 and 850 is considered excellent (or exceptional). Keep in mind that credit score ranges are wide and that a change of a few points usually does not make a huge difference to lenders, especially if your credit score is in the exceptional range. So you may have perfect credit one month only to find your score dropping slightly the next, even if you made every payment on time. Some factors that affect your credit score, such as the ratio between your debt and your credit limits, changes from month to month. It also involves optimizing the other factors that play into your credit score, such as maintaining a low ratio between your debts and your credit limits, a mixture of different types of loans, and avoiding excessively applying for new credit. It requires an incredibly long history of making on-time payments on your debts. Very few people can reach a perfect credit score. A credit score of 850 means that a borrower’s credit is so good that small differences don’t matter much when it comes to lending risk. For example, one might use 6% of their credit limits while the other uses only 5%. Two people with 850 scores can have small differences in their credit histories. With the FICO Scoring model, the perfect credit score is 850.Ī credit score of 850 does not mean that every aspect of your credit is perfect. If you have good credit, setting a goal to improve your credit into the very good range gives you a specific target and can encourage you to work toward that milestone. They also tend to pay lower interest rates than people with poor credit.Ĭredit score ranges are also helpful for setting goals. Generally, people with good credit scores have higher access to credit and find it easier to borrow large sums of cash. Instead, you can use the credit score ranges to gauge your ability to borrow money. Similarly, you could have very poor credit and find a lender willing to extend credit to you. You could have a perfect credit score and still find a lender that denies your application. It’s important to note that while the credit score ranges are useful for getting a quick idea of the quality of your credit, they don’t offer any concrete perks or guarantees. Having lower debt balances compared to your credit limits also helps to increase your credit score. Generally, the more on-time payments and the fewer late payments you’ve made, the better your score will be. Some of the most important factors in determining your credit scores are your payment history and how much debt you currently have. Even within the FICO Scoring model there are multiple ways of calculating credit scores.įor example, you might get one score using the FICO Score 8 model and a different one using the FICO Mortgage Score model.Īll credit scoring models look at similar information about how you’ve managed your bills in the past. One of the most popular is the FICO Score, developed by Fair Isaac Corporation. There are a wide variety of credit scoring models. Like the letter grading system that people are familiar with from school, there are different credit score ranges that most credit bureaus and lenders agree on. Higher numbers indicate better credit, just like a higher score on an exam indicates a better grade. Credit scores are numerical scores that range from 300 to 850.
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