Before applying for credit, you should learn your credit score. This score determines your attractiveness to lenders, which influences your likelihood of receiving a loan and the interest rate that you will have to pay. Different credit reporting agencies use different credit score ranges, but they all generally use the same criteria to come up with your score. Therefore, it behooves you to know exactly what they are looking at so you can effectively work on your credit score and bring it up to a higher level. Once you’ve done that, you should be eligible for more favorable loan offers.
Low Credit Scores
Any credit score that is below 579 is considered very poor, making it unlikely that you will receive a loan. How low your credit score goes depends largely on the credit score range used by a reporting agency. Equifax credit scores, for example, can go as low as 334, while Transunion scores go down to 309 and Experian scores go down to 320.
If your score falls into the 580 to 620 credit score range, it still means that you have poor credit. In this case, however, you are more likely to receive some sort of loan if you apply, although you will be subjected to extremely high interest rates.
Better Credit Scores
If you are in the 620 to 659 credit score range, it means that you have average credit. Those with average credit can usually secure unsecured credit cards and apply for bank loans. While your credit still needs improvement, lenders will not see you as a major risk, especially if your recent credit history is positive. In most cases, you will need a credit score of at least 620 to secure a mortgage.
Those who fall into the 660 to 699 credit score range have good credit and, therefore, will receive terms that are even more favorable. While lenders still see some risk in these individuals, as the delinquency rate for people in this range is about 15 percent, it is much better than having a credit score below 660.
Great Credit Scores
Once your credit score goes above 700, you will start receiving very good interest rates. This is because the delinquency rate for those in the 700-plus credit score range is about 5 percent. Those with a credit score of between 700 and 759 have great credit and can receive almost any type of loan.
Anyone with a credit score of 760 or above has excellent credit and is likely to receive benefits such as prime interest rates. Only a small percentage of the population has excellent credit, so lenders are willing to give these people the lowest possible rates. Only about 2 percent of people with excellent credit default on payments, so there is very little risk to the lender.
The level that your credit score can reach once again depends on the credit reporting agency that is used. Equifax scores go up to 818, while Transunion scores go to 839 and Experian scores go to 844. None of this really matters, however, as anything above 760 is enough to get you extremely low rates.
Your Credit Score
As you can see, your credit score can go as high as 844 and as low as 309. Therefore, most people speak of the credit score range as being between 300 and 850. The higher your credit score, the more chances you will have to receive loans and make the purchases that you want without paying high interest rates.