By now you should be closely monitoring your credit. However, if you haven’t been paying attention, then follow along closely this is for you. FICO and Vantage scores are used by over 90% of lenders to determine your creditworthiness. It is a score that tells lenders whether you are a good risk, a marginal risk, or just too risky to do business with. The FICO score comes from 5 factors that are found in your credit report. Each factor is assigned a percentage of importance, and then they are combined to come up with a number. Understanding what that number means is important.
The Credit Score Range
Credit scores fall into categories, exceptional, good, fair and poor. Your credit score tells lenders what credit risk you are to them. Here is the breakdown:
800 and Above: Exceptional. This credit score range is far beyond the national average and now very frequent. Anyone with a score of 800 or above is golden when it comes to getting approved for lending. Lenders love this score set because the risk is at 1% that the person will become delinquent or default on payments.
740 to 799: Score: Very Good. This score range is above the national average and is considered a low risk by lenders. The risk factor is only at 2% for lenders that a person with this score will become delinquent or default.
670 to 739: Score: Good. A “median” range, the national average and is the most commonly seen score. This is deemed an acceptable risk level for lenders. You may not get the best interest rate at this score but you won’t get denied either. The risk factor for lenders is at about 8%.
580 to 669: Score: Fair. This is below the national average and can make it hard to get credit. About 28% of consumers with a score in this range are likely to become delinquent or in default.
579 and lower: Score: Poor. This is considered a high-risk credit score by lenders. Most consumers will be denied or must put down a high down payment, provide security for a loan and/or pay a higher interest rate. The risk factor to the lender is as high as 61% that the consumer will become delinquent or will default on payments.
Did you know that there are scores that are lower than 579? It drop to below 600 for many reasons for example if you just came out of bankruptcy or you have had some serious financial problems. Improving your score is possible, so do not get discouraged if your score is low or if you haven’t started. Begin today and start taking the steps you need to today to strengthen your scores!
You are transforming your financial struggles into financial victories.