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The Credit Score Scale Revealed
I'm willing to bet that at some point you have heard of the credit score scale. I'm also willing to bet that you're not entirely sure how it works, how it's calculated and whether your rating is good or bad. While none of the agencies that calculate these scores don't share their formulas, the good news is that it isn't all that mysterious. Here is some of what you should know about the credit score scale and your credit.
The first thing to know is that the scale doesn't start at 0. Instead it ranges from a low of 300 to a high of 850. So, if you've ever had a peak at your score and saw it was 325, thinking that didn't sound too bad, you were actually at the low end. On the other hand, if your debt-to-income ratio is low, you have never missed a payment, and done many other things just right, your score may be quite close to a perfect 850. However, only a small portion of people will have a perfect score, or the worst score.
What if somebody has a score of 720? That's 130 points short of a perfect score, and may not sound all that great, but most lenders consider that to be the top level on the credit score scale and will give the best loans to those who are above 720. There was a time when a score of 680 or above would have put you in the top level, but now it appears 720 is the cut off point.
Perhaps you have a few minor problems with your credit history; it's not ideal, but you're sure it's still pretty good. If so, you may have a rating between 680 and 720. You may not get the best terms at this level, but you should still have an easy time getting a good loan with a decent interest rate.
The next level down on the scale is for those who fall between a rating of 630 to 679. You may not be able to get a loan at all at this level, and if you do, the interest rate will likely be higher. Most often, though, if you take the time to look around you should be able to find a lender to give you a loan; keeping in mind that the terms may be less than ideal.
The lowest level is for those with a score lower than 630. At this level you will probably find getting loans very difficult. Therefore, if you are planning on getting a new car or buying a home in the near future, you should do whatever you can to get your number above 630. Of course, the closer you can get to 720, the better, but your number should be at least 630 before you even try to get a loan.
Finally, all of the levels we just mentioned are guidelines. They are generally true, but some lender's policies may differ slightly. That's why it's always a good idea to go to more than one lender, no matter where you fall on the credit score scale.
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