The Credit Score Range
“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”
—Will Rogers, Humorist
What is your credit score range? A credit score is primarily a three digit number calculated from your credit report and is one factor used by lenders to determine your creditworthiness for a mortgage, loan or credit card. Your score can certainly affect whether or not you are approved for a loan, as well as the interest rate you are charged.
Your credit report is one of those things that follow you around like a shadow, and many people don’t see this lifelong partner until it’s too late. Much like a report card for adults, a credit score range applies to an individual’s responsibility with money. In some cases, this label also discloses one’s possibility of being a liability.
While any one score could mean any number of things to the organization looking into the matter, the difference from good and great can be the difference in thousands, or tens of thousands, of borrowed dollars. Therefore, having a good or great credit score range can be the difference in your family’s neighborhood.
Not understanding your credit score range could mean that you are unable to save money and it could also mean that the banks will charge you more money (as interest) than those with good credit.
So, you may be asking – what is my credit score, or what is a good credit score? How to improve credit score? Continue to find out the basis for a good credit score, how to check it, and how to raise your score.
How Can A Bad Credit Score Affect You?
“Nobody had a credit card when I was a kid. No one had credit card debt. But these big companies and banks wanted to know how to get more money out of people — get them charging for things.”
—Michael Moore, Filmmaker
For those with poor credit, it’s possible that they will never be able to open a regular credit card account. In the past, a credit card didn’t seem necessary, but today it’s certainly closer to a necessity than a luxury. Simple credit cards can help you improve your credit and many services like hotels or cabs require a credit card.
In addition to not acquiring a basic credit card, poor credit can also halt you from getting mortgages, auto loans, or personal loans. If you toe the line between good and bad, the loan you do receive will generally have a higher interest rate, which will add up over years of payment.
For those not considering a larger commitment like a mortgage, it’s important to remember that poor credit can also affect your likelihood of something such as renting a nice apartment. Reputable apartment communities do not take risks on individuals with poor or even mid-level credit scores, so this could put you in a lesser neighborhood, which could even affect your family’s safety.
Credit Scoring and How to Raise Your Credit Score
“When you need to borrow money, the Mob seems like a better deal. ‘You don’t pay me back and I break both yer legs.’ Is that all? You won’t take my house or wreck my credit rating? Fine, where do I sign?”
—Craig Ferguson, Comedian
According to My Fico, “the most widely used credit scores are FICO Scores, the credit scores created by Fair Isaac Corporation.” The site adds, “90 percent of top lenders use FICO Scores to help them make billions of credit-related decisions every year. FICO Scores are calculated based solely on information in consumer credit reports maintained at the credit reporting agencies.”
A credit score range lies between 300 and 850 and high scores mean low risk to banks and low interest for consumers. While there isn’t a standardized unit of good and bad, it’s important to remember that each lender has their own unique strategy when deciding whether or not to approve an application for a loan or otherwise.
Many apartment complexes, for example, send applications off to a third party to determine a FICO Score. The complex then receives a pass / fail response, or perhaps a green light, yellow light, red light response. For those with medium credit (yellow), this could affect their deposit cost, while those on the lower end (red), may be flat out denied.
So, what is considered a good credit score? Continue to find out the basis for a good credit score, how to check yours, and how you can raise your score.
Running the Numbers
Financial site Credit.com list the following chart of excellent to bad credit:
750+ Excellent Credit
700-749 Good Credit
650-699 Fair Credit
600-649 Poor Credit
300-599 Bad Credit
However, as stated, every lender has their own opinion of good and bad, so the question what is a good credit score can have a slight variance by lender.
What Factors Determine a Credit Score?
“Procrastination is like a credit card: it’s a lot of fun until you get the bill.”
Several factors decide your FICO Score. As listed on My Bank Tracker, there are five main aspects that determine credit.
- Payment History
- Amount Owed
- Debt Types
- Age of Accounts
- Credit Applications
Thinking once again of the apartment application, of the five factors that determine credit, payment history is the most important. When a credit check falls somewhere in the middle, the first thing many companies do is check the payment history.
For example, when an apartment application comes back conditional, the new dwelling will send over a Rent Verification Form to check payment history with previous residencies.
With this in mind, always keep your balances low so when the time comes, the credit line appears to be updated accordingly. If you already have one credit card that is nearly maxed out, don’t apply to multiple new cards all at once because that can also lower a different aspect of your credit score.
So ask yourself, “How can you master your credit score range? How to raise your credit score?”
Ways to Master Your Credit
“Bad debt is debt that makes you poorer. I count the mortgage on my home as bad debt, because I’m the one paying on it. Other forms of bad debt are car payments, credit card balances, or other consumer loans.”
—Robert Kiyosaki, Financial Author
Whatever your current circumstances, there is always the chance to start building better credit. The following principles will help you get started.
Become an Authorized User
Also known as piggybacking, becoming an authorized user means that you are permitted to use a credit card where another individual is the primary account holder. In this scenario, the primary holder is responsible regardless of which user runs up the account.
Because the entire account is affected, there are pros and cons to piggybacking. The actions to the account can increase the credit of the primary holder and it can also increase the credit and score of the authorized user.
As credit expert Barry Paperno writes, “In recent years, piggybacking has become one of the more popular ways of building credit for someone who is either new to credit or recovering from financial setbacks.”
With an example, he continues, “A young person piggybacking on a parent’s long-held and well maintained card can, without having any credit of her own, achieve a very good credit score based on a credit history older than she is.”
Increase Your Credit Limit
For some, the phrase “will power” comes to mind when considering an increased credit limit. If you’re nearly maxed out one card, won’t raising the limit increase your chance of spending more?
But if you’re in a situation where someone is about to run your credit for something more important, increasing your limit can improve the credit score as the percent owed will then be lower. This is known as the credit utilization ratio.
Most cards come with a ceiling and after an introductory period, many credit card companies will automatically raise that ceiling. For those who haven’t received an increase, there are ways to simply ask for a higher credit limit.
In many ways, the credit ceiling is out of your control. However, it is a business so there are always other options. In general, it’s ideal to only spend 30 percent of your limit (or less). Therefore, when asking to raise the ceiling, do so in a way that your new balance will be around 30 percent of the total amount.
How do you ask for a raise in your spending limit? Consider this sample:
Cardholder: [Introductions] I’d like to request a higher credit limit on my card.
Representative: Let me check and see if I can help you with that.
Cardholder: I’m mainly interested in lowering my utilization ratio to increase my credit score. I’ll be applying for a _______________ soon (Mortgage, etc.).
Representative: We’re actually not offering credit increases at the moment.
Cardholder: So this is company policy or does it apply to my particular situation?
[Then, depending on their answer]
Cardholder: I do have other credit card offers, but I’ve been with your organization for _____ years and I would prefer to stay here rather than try another company over a small amount of money.
Representative: What kind of increase are you looking for?
Cardholder: Can you describe details for what I may qualify for?
Representative: Yes, we can look into that. Would you like to start the application process for an increased limit?
Cardholder: Yes. Will this affect my interest rate or minimal monthly payment?
[Continue here as you see fit, keeping your specific plan in mind].
Since most people get into debt by making a multitude of small purchases, this method can also be successful in paying off acquired debt. Rather than making single monthly payments, it’s possible to spread the bill over several small payments each month.
Making micropayments can better align your paychecks with your payments, since many people receive a check every week or every other week. This way, it’s easier to reduce the burden and chip away slowly at the acquired debt.
Another benefit of making micropayments would match that of a biweekly mortgage. It’s actually simple math, despite being hidden in what’s considered common.
With a biweekly imbursement, payments are made every two weeks, meaning that a full payment can be made every four weeks. With that in mind, as there are 52 weeks each year, that means there are 26 half-payments and therefore, 13 full payments, rather than 12, if you were to pay each month.
Once you begin the method of paying a little each paycheck, it’s possible to take advantage of future windfalls that may arise. When good fortune arrives, such as a bonus at the office or a hefty commission check, the biweekly mentality makes it easier to use that money for the purpose of erasing additional debt rather than celebration alone.
Micropayments are ideal for making good payment habits. As the balance falls each paycheck, the burden lowers and the credit score improves.
Have Your Landlord Help
All commercial properties for profit keep track of payments and insufficient funds, but few report this without being prompted. If your rent payments are made on time, you can ask your landlord to report this good score to credit bureaus.
Using these methods, you can then become a watch-dog for your credit score range. Keeping up with the above tactics will help you be on your way to an improved score. Sites like Credit Karma, Bill Guard and Annual Credit Report are a few free examples so you should never pay to receive your credit score.
Quick Tips to Create an Affordable Debt
“A man in debt is so far a slave.”
—Ralph Waldo Emerson
After you’ve mastered the above principles, there are additional steps to consider.
First, if you’re still paying high interest amounts on your credit cards (anything above 15 percent), then start looking for a credit card that allows a transfer with a 0 percent rate or similar introductory offer.
Next, consider refinancing any large loans, such as student loans. Find someone who can help decrease your rates. Ask peers in similar situations to get local help and this method can apply to mortgages as well as student loans.
Life is Cheap with Good Credit
Consider the real estate entrepreneur who has worked their way up in the market and can now get approved for a $50,000 loan with a mere phone call. It’s possible that you will hear stories of deals too good to be true. In reality, these deals are more and more available to those with good credit.
For those without good credit, the deal wouldn’t be too good to be true, but it may still be out of reach.
Banks will actually fight for your business if you have good credit. Your rates will be lower and the offers will be plentiful. Even a mortgage rate with a slightly lower interest rate (imagine 3.8 percent rather than 4.4 percent), could result in a savings of tens of thousands of dollars depending on the cost of the initial purchase.
What is a Perfect Credit Score Range?
“Being rich is a good thing. Not just in the obvious sense of benefiting you and your family, but in the broader sense. Profits are not a zero sum game. The more you make, the more of a financial impact you can have.”
A percent FICO Score is 850, but according to Fair Isaac, only around 0.5 percent of consumers reach this unlikely goal. In addition to the methods listed in this guide, it’s also important to take on a variety of credit lines when chasing the pursuit of perfection.
If you have student loans, consider getting a credit card and only use it for its benefits, such as a card that pays on gas and groceries. Pay your bills on time—every time—and put these methods into action to master your credit score range.