UPDATED: 04-22-2012

From time to time most of us find the need for financial assistance. This could be in the form of a personal loan, a car loan, a mortgage or re-mortgage or for a credit card application. But why do some people manage to secure what seems like a better deal than other people do? It all comes down to your credit score scale.


Many Americans today rely on credit to be able to acquire the things they need and desire. For this reason it is important that they understand how lenders quantify their credit standing. The following is a simple breakdown of the credit score scale, to help you figure out exactly where you stand, and what kind of credit power you have.

There are several systems that can be utilized to calculate a score, and it is up to the lender’s discretion as to which system will be chosen. However, the most widely used system to generate a person’s score is the Fair Isaac Company scale, or FICO score. Most lenders will look at the information of an applicant stored in the three major credit bureaus in the United States.

The three bureaus are Equifax, Experian, and TransUnion. While the range of the FICO score can vary at times between these three bureaus, the most widely accepted one is the range of 300 to 850. The high a person’s score the better his or her credit standing.

Components Used to Calculate the Score

There five components considered when generating a person’s credit score.

The first, weighted at 35 percent of the overall score, is payment history. Next, weighted at 30 percent, is the amount of outstanding balances or how much of the existing credit is being used. Thirdly, worth 15 percent is the length of credit history. The fourth component is the different types of debt and this worth 10 percent. Finally, also worth 10 percent is the number of accounts that have been recently applied for or opened.

credit score scaleBreakdown of the Categories in the Scale

Excellent or Perfect Credit is the top category range between 700-850. The people who fall in this range can expect to have credit extended to them at the lowest rates available.

Good Credit is the next level down between 680-699. Those who fall here generally have no problem finding a lender that will extend them a line of credit, but they may not be able to receive the best interest rate on the loan.

Fair Credit is the following category between 620-679. People whose score falls in this range may sometimes experience difficulty finding a lender that is will to extend a loan to them, and their interest rates will be higher than those who have excellent or good credit.

Poor Credit is next at the range of 550-680. These are the individuals that pay the highest interest rate on their loans. They are also extremely limited by the number of lending agencies with which they can do business.

Bad Credit is the lowest grouping, anything below 550. If a person’s credit score falls in this category, then finding a lender that is willing to extend credit is near impossible. If someone has a bad credit score then he or she will need to do ‘credit repair’ before almost all of the lending industry will consider loaning them any money.

It is important to understand one’s credit history and score because then a person can ensure that he or she maintains a good credit standing.  And if you for some reason get into debt and are having a difficult time with your finances, you may have to ride out the storm and wait until the time is appropriate to begin fixing your credit score.

Those with an excellent credit score will have no trouble obtaining finance from almost any lender. These people are most likely keeping up on their credit score and making sure to get their free annual credit report each year.  Their credit score suggests they are a safe investment with almost no risk of not paying back the debt on loan. Those with a poor credit score will have trouble obtaining finance from almost all lenders. Their credit score suggests they are risky investments who have historically had trouble repaying their debts. If those with poor credit are able to find a lender willing to offer them finance their contract will likely carry heavy restrictions and penalties. The best interest rates will not be offered, they are reserved to secure the custom of those with good credit. A deposit will almost certainly be required. Late payment penalties will be costly and strictly enforced. While being given the finance can give those with poor credit the opportunity to repair some of the damage they have previously done to their credit score, it can risk further and longer lasting damage if they do not strictly adhere to the conditions of the agreement.

No matter what country you are in or what type of finance or loan you are after, some form of a credit rating will first be assessed before any contract is offered. The credit scales do vary throughout the world and sometimes throughout different industries. Scores can be represented as letters such as AA or numbers on a set scale such as B09. Regardless of what scale is used, the results are always based on the same information from your financial history.

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