Credit Score Scale

Understanding the Credit Score Scale

Most of us have a general idea of the importance of having a good credit score. But what about when it comes to breaking it all down to the specifics for achieving good credit? Your credit score will determine whether you qualify for a loan, how much your loan will be and what interest rate you will pay on the money that you borrow. The credit card scale goes from 300 to about 850 (300 being the worst and 850 being the best). But it is the actual breakdown of the components that are used to compile the score and the credit score scale that hold the real meaning.

Those who are lucky (or deserving) enough to have no flaws in their credit will have scores above 800. If you have no credit history at all, you will have a score of 800 but that doesn't really mean anything. In order to get the best interest rates, you need to maintain a few years of above 800 credit.

The next jump down in the credit score scale is to 720. These are still considered excellent scores and you will qualify for the best or almost best interest rates if you fall above this range.

A credit score of 680 to 720 is still very good. Although it won't get you immediately in the loan door, you will most likely qualify for the loan that you are seeking. You will probably pay a bit more for interest than the next rank up.

Once you get below 680, you will start to head into some difficulty. This is not a bad score but at this point you may be declined for loans and, if you do qualify, you will have more restrictions and probably a higher interest rate. When you are in this range, do anything you can to improve your credit score. You could be charged slightly more for your vehicle insurance.

Once your score drops below 620, you are considered to have bad credit. Generally, being above 580 might still get you a loan. However, the amount of the loan will be limited and your interest rate will be higher. Something fairly serious must happen to bring you below 580. This could happen if you are in foreclosure, collection or bankrupt.

If your credit score has fallen below 500, it means that you have quite a few bad marks against your credit and very few good marks. At this point, it won't be easy to obtain any loans or credit cards. You may also have to pay a premium for your auto insurance.

The good news if you do have a below-average credit score is that, as time passes and you continue to pay your bills on time, your credit rating will gain ranking in the credit score scale. Most bad marks will stay on your credit report for no longer than 7 years. Each and every month that you pay your bills on time, your credit rating improves.