Credit score rankings and what they mean
Quick insights
- Credit scores range from 300 to 850 and are grouped into categories that may affect loan approval and terms.
- Lenders typically use VantageScore® and FICO® models to assess creditworthiness based on various factors, including payment history and credit utilization.
- Working to improve your credit score over time may include understanding its calculation, reviewing your credit report and practicing thoughtful financial habits.
Credit scores, among other factors, are used by lenders to help determine creditworthiness based on various credit score ranges. Let’s review the different ranges and what they mean.
What do the credit score rankings mean?
When people refer to “good” credit, “prime” credit or “poor” credit, they are typically referring to tiers of credit score ranges. Knowing where your credit score falls may help you understand how lenders could view your credit application.
- What is a credit score?
- What is the full range for all credit scores?
- What are the credit score ranges?
- Ways to use your understanding of credit to help improve your credit score.
What is a credit score?
Credit scores are three-digit numbers assigned to people with a credit history. A credit score is used by lenders to gauge individual creditworthiness. The score takes into account various factors in your financial history and behavior, including how consistent you’ve been with payments on credit cards, loans and other bills.
If your history is filled with positive behaviors like on-time payments and you’ve managed your assigned credit, then you’re less likely to be seen as someone who may default on a credit card or loan. By the same token, if you have late or missed payments, then your credit score will factor this in, assigning a number that signals a higher risk of default.
How is my credit score calculated?
There are two main credit score calculation models in the US:
- The VantageScore—a competitor to FICO, created in 2006 by the three main credit bureaus.
- The FICO Score—a score calculated with software from Fair Isaac Corporation (FICO) and commonly used in lending decisions.
The three credit bureaus, Experian™, Equifax® and TransUnion®, collect financial information about you, like your payment history, and put it in a credit report. The VantageScore or FICO algorithms are then applied to those reports to determine your credit score. Keep in mind that the algorithms for calculating scores change from time to time. Reviewing credit reports regularly may help you understand the factors credit bureaus consider when calculating scores.
What are the credit score ranges?
Both VantageScore and FICO scores span from a low of 300 to a high of 850. They are then split into ranges, based on how low or high your credit score is.
VantageScore credit score ranges are:
- Superprime: 781 to 850
- Prime: 661 to 780
- Near Prime: 601 to 660
- Subprime: 300 to 600
FICO credit score ranges are:
- Exceptional: 800 to 850
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
Lenders use these credit score ranges as a way to consistently and objectively evaluate your potential credit risk. Lenders can then assign interest rates, fees and payment terms on your line of credit.
What your credit score range means to lenders
Lenders use a credit score range as a broad view of a borrower’s credit history. Credit scores are not the only factor in credit decisions. When lenders evaluate a specific loan or credit application, they may be more likely to research the distinct details of a borrower’s full credit report and credit history before they approve or deny the application.
Tips to help build an “exceptional” credit score (FICO: 800-850)
Borrowers with credit scores in the exceptional FICO Score range may have missed few or no payments in the past seven years. Additionally, they may have a credit utilization rate of less than 30%, meaning that their current ratio of credit balances (what they owe) to credit limits (the amount of credit approved for use) is roughly 1:3 or better. They may also have a diverse mix of credit, which may contribute to a healthy score.
Tips to help build a “very good” credit score (FICO: 740-799)
As with borrowers in the exceptional credit score range, borrowers labeled as “very good” by their FICO Score typically have a solid history of on-time payments across a variety of credit accounts. Factors keeping them from an exceptional score may be a higher than 30% debt-to-credit limit ratio or a short history with credit.
Tips to help build a “good” credit score (FICO: 670-739)
Reviewing your credit report may reveal what could be hurting your score and show potential ways to build it. Maintaining a positive payment history and low balances across various forms of debt may improve your credit score over time.
Tips to help build a “fair” credit score (FICO: 580-669)
If you are trying to get your credit score into the “fair” range, your credit report can provide information about your credit history. If you notice missed payments or defaulted loans or lines of credit, you may be able to negotiate with the lender directly for an agreement that allows you to make manageable, on-time payments. Getting back on track with these consistent payments may help improve your credit score over time.
As you work through meeting your debt obligations, it may not be helpful to close the accounts. Open accounts with a long history could be positively contributing to your score and can potentially be used responsibly in the future.
In summary
Understanding what a credit score is and how it is calculated can be a helpful first step in your credit journey. While a higher credit score may be viewed favorably by lenders, credit decisions are based on multiple factors.
