Considering the fact behind approval rates, typically falling between the range of 300-860 points, a credit score of 600 or above received favorable responses. Any fico score surpassing 800 on the same band is deemed to be excellent. If not, most consumers credit scores fall between 600 and 750 [Study Lab, 2017]. Creditors tend to exercise leniency for high scorers while imposing stricter controls to that of lower scores (in the range of 300-550) – statistics proven that better scores tend to yield lesser defaults on borrowing.

 

Generally, credit scores are assessed by prime lenders; credit card companies, car dealers offering in-house loan rates, bank mortgage departments – making crucial decisions in fetching debt valuations (issuance of a bank loan or new credit card) and tiered interest structures (like ongoing interest rate or initial cash payment). Experian [2015] mentioned on some common types of credit scores; FICO® Scores and scores by VantageScore, hinting other yet relevant industry-specific scores in the keep.

 

Source: Blogosphere of Equifax, Experian and Transunion [2009]

 

 

What is a good FICO score?

Invented by Fair Issac Corporation, renowned industry standard practices in today’s world, one of the highly rated types of credit score is FICO Scores. Bulge bracket lenders such as financial institutions often used FICO Scores while Mester [2013] depicting a broad range from 300 to 860. According to Experian [2009], in the eyes of such models, any FICO Score above 670 is deemed to be a good credit score and a score above 800 is perceived to be of high quality, if not exceptional.

 

Source: Experian on FICO Score Ranges [2009]

Credit Score

Rating

% of People

Influence

300 – 579

Very Poor

17%

Applicants may need to pledge a collateral or deposit. Those who defaulted in the past may not be approved for credit.

580 – 669

Fair

20.2%

Applicants are deemed as subprime borrowers in this range.

670 – 739

Good

21.5%

Experian’s study concluded only 8% of applicants within this score range may default in future – delinquent status.

740 – 799

Very Good

18.2%

Lenders offered better rates for applicants in this score range but subjected to past payment histories.

800 – 860

Exceptional

19.9%

Applicants having such scores seem attractive to lenders and obtaining the best rates from most lenders.

 

 

Source: Blogosphere of Equifax, Experian and Transunion [2009]

 

 

What a good VantageScore looks like?

As aforementioned above, Scores by VantageScore are common kinds of credit scores utilized by lenders. Three major credit bureaus, collectively known as Experian, Equifax and TransUnion, developed VantageScore for consumers to perform research on a centralized platform. For the latest development of VantageScore 4.0 (beta mode), the model is based on 300 to 860 range. For borrowers having above 750 score is deemed to be exceptional, anything above 700 can be of similar ratings [Total Credit Check, 2011].

 

Source: VantageScore by 3 Major Credit Bureaus [2015]

Credit Score

Rating

% of People

Influence

300 – 550

Very Poor

14.4%

Applicants may need to pledge a collateral or deposit. Those who defaulted in the past may not be approved for credit.

551 – 650

Fair

28.7%

Applicants are deemed as subprime borrowers in this range.

651 – 699

Good

18.2%

Experian’s study concluded only 8% of applicants within this score range may default in future – delinquent status.

700 – 750

Very Good

12.2%

Lenders offered better rates for applicants in this score range but subjected to past payment histories.

751 – 859

Exceptional

26.5%

Applicants having such scores seem attractive to lenders and obtaining the best rates from most lenders.

 

 

How important is a credit score check?

What are the indicators financial companies used? Most lenders observed credit scores in anticipating your financial status, and the ability to repay in a timely fashion. Also known as risk scores, lenders may take the opportunity to calculate potential “risks” associated to your credit accounts – in exchange for a peace of mind.

 

The quality (or outcome) of a loan highly depends on good credit score, best if it is excellent in the eyes of debt financiers. Indeed, the difference in mere few basis points may do injustice in getting a lower-than-average interest financing, ended up paying for more than thousands of dollars out-of-pocket fees. Mishkins [2013] argued that such cost of savings is not friendly enough to qualify for home rentals or even financing a home.

 

One has to rationalize the concept of building a legacy. A few poorly controlled financial habits can wipe out a lifetime of reputational assets. Levine et al. [2015] revealed a statistical report of more than 30% of Americans not having a single dime in savings – debt-ridden till deathbed. This study further emphasizes the need of prudent savings plan and not seeking endless financial help from local government bodies.

 

An alternative is to start with a financial objective, simply like saving up for a new auto or renting a new apartment, your credit is the first to come to mind. There is no secret formula for creditors to determine your financing ratio, bearing in mind that 609 credit scores or above is the minimum standard fixated by legal lenders. Raken & Lim [2003] encouraged participants to adopt a SMART goal-setting method, thereby lowering risk of getting into economic turbulence.

 

Inversely, credit scores are not ‘everything’ that lenders demanded from borrowers. Your individual credit report plays a significant role in namely; how much debt you have, claims listed by creditors, tenure of past borrowing histories, and other negligence derogatory marks being slammed. In fact, apart from your credit report and credit scores [Money Matters, 2010], licensed lenders too assessed your monthly spending against overall earned incomes, well beyond the means of scoring system.

 

Fact: One common misconception is that ‘Someone’ is 90% 100% accountable for your entire liabilities. Wrong – take part in Credit Score Simulation today!

 

What factors affect personal credit score?

There are many scoring models being used among asset-liability management firms. Since there is no one-size-fits-all, information impacting a credit score is highly variable though not close to complete randomness [Sincere, 2014]. A few key elements affecting your credit scores could be identified within your personal credit report (as seen below):

  • Historical payment gateway – one of the fastest ways to seek clarity, weeding out delinquent holders while minimizing potential false positive hits, either missed payments or frequent negotiations for waivers for credit cards
  • Credit utilization rate – another common method to fish out overleveraged borrowers, thereby lowering risks of loan defaults, generally kept under 30% of total borrowed sum [KIG Hall, 2018]
  • Personal information context – number of outstanding liabilities, rate of finishing up debt payments and aged credit accounts
  • Debt-to-Income ratio – an alternative to determine interest-financing rates, based on big but raw data
  • Dishonored requests – tax liens on credit report, civil judgments from Courts, bankruptcy charges or other minor claims
  • Credit repair paid efforts – ongoing negotiations in an attempt to remove hard enquiries from credit report

 

Discover FICO score elements

  • Exceptionally impactful: Amount & Date of payment on credit cards and loans
  • Highly impactful: Sum of total outstanding balances owed
  • Moderately impactful: Tenure of credit history
  • Less impactful: Portfolio of debt mix (number of credit accounts set-up)

 

Uncover VantageScore 3.0 models

  • Exceptionally impactful: Payment history
  • Highly impactful: Percentage of credit limit indulged, and aged of account
  • Moderately impactful: Number of debts combined
  • Less impactful: Number of inquiries for your credit report

 

Negative consideration on credit score include:

  • Personal identifiers: Your marital status, nationality, country residence, color, race, language or ethnic – under strict regulations by Consumer Credit Protection Act [AAA-Credit Guide, 2001]
  • Individual Age
  • Type of Employment: Nature of industry, specifics of workplace or any contractual agreements within the Individual Employment Act – notwithstanding external factors in justifying for ultimate decision making process.
  • Location: Where you are currently residing – but subjected to local jurisdictions outside of United States (or certain laws like Dodd Frank, 2013)

 

How to boost your credit score fast?

If you’re frustrated at your current invalidated information, discovering lack of proper attention after reviewing your credit information, chances are there might be more surprises in the bag. Different reporting agencies honored stipulated timings in updating your credit report to the latest version hence reflecting the nominal value of your credit score.

 

At KIG Hall’s score simulator, you can make important self-discoveries on those companies failing to accurately detect the best credit scores for you (filing legal disputes had always been your responsibility, no?) – Find out the realest method to resolve bad credit karma:

  1. Life-changing decisions on credit score after Chapter 7 or Chapter 13 bankruptcy discharge
  2. Rebuilding credit score history using secured charge cards
  3. Dos & Dons of credit repair service providers [KIG Hall, 2018]
  4. Undergo credit restoration or enhancement initiatives [Credit-Repair Ex, 2013]
  5. Learning how to read a fico scorecard and meaning of assigned figures
  6. Proactive attitude in removing tax liens in your credit report and understanding the magnitude of not repaying debts within the bounded agreements

 

Negative impact on credit score include:

If you’re to invite lenders to review your credit score between the range of 300-600, far cry from the much-welcomed 700 points figure, chances of obtaining an approval on credit cards or loans application are going to be slim [How to Fix You, 1999]. Even if an association practices leniency, the rate of interests is going to be highly unfavorable, not to mention requesting upfront security deposit. The only thing you could do is to be prudent in current consumption spending as well as waiting for the natural credit recovery to occur.

 

A handful of mortgage servicers rendered consumer support to lower end credit scorers:

  • FHA mortgage packages come with a 3.5% down payment and a minimum of 575 or above – borrowers yielding 580 onward stands higher chance of success
  • Applicants under 580 score may need to fork out larger down payment of 10%, but in line with other expectations

 

What to do when I don’t have a credit score or 0 score?

Under normal circumstances, such as being a student or freshly out of college, having no score available is almost fine. Conversely, ex-bankrupts trying to rebuild credit portfolio mix also possess insufficient history. Please do not get confused on the slow updates on credit karma platform, though. Re-define your methods in establishing credit as per below:

  • Under age 21: Seek a co-signer first or demonstrate the ability to repay via source(s) of earned income from employment
  • Guarantor: a guardian or parent may authorize you to hold a credit card (or multiple cards)
  • Others: ranging from bankrupts to discharge bankruptcies, one good idea is to consult the nearest credit union for financial assistance in rebuilding your borrowing histories – best if a secured or charge card is being applied and used over a period of 12 months

 

Hard Truths behind individual credit score

Differentiating your credit scores from 3 annual credit reports is important. Mishkin & Lawyer [2011] rebutted on the need to know that your personal credit score is calculated upon request, and not the other way round. It is being updated over time – once fresh entries had been received from creditors; missed payments, increasing lines of credit and total outstanding debts.

 

How does marriage affects credit score?

Short answer is no. In an event of being engaged, there will not be a merger & acquisition on any of your credit scores or reports [Credit Karma Experian, 2012]. Instead, a joint account titled may be display on both credit reports, but the type of lending history still remains unchanged – preventing an unfortunate incident known as identity theft.

 

What is Experian’s credit score check?

Lastly, some people misperceived that calculating your own credit report or score can raise red flags on the radar. Immediately dispel such malicious thoughts as self-inflicting damages can be contagious too. Please be informed that checking your own credit scores is classified as soft inquiry – a unique concept of calculations without impacting existing ratings. Raven [2003] encouraged individuals to take a bold step forward in recognizing the need for calculations, sometimes seeing as a fun activity to manage personal finance well!

 

Quote of the Day: “Patience is Attractive – LIG Corp [2018]”

 

Relevant Topics

» What is a Credit Report: Learn more about using a report card to your advantage!

» What is Credit Repair: Find out various means to fix current sorrows!

 

This article was originally published on January 15, 2014. It has since been updated.