Your credit score is a three-digit number that represents your creditworthiness at a given point in time. Your credit score is based on information in your credit report the day your credit score was generated. Since credit report information can change from one day to the next, your credit score can change, too.
Multiple Credit Scores
You don’t have just one credit score. Instead you have several different credit scoring from multiple companies who’ve created credit score calculations. Each of the credit bureaus – Equifax, Experian, and TransUnion – has their own credit scoring method. Then, the credit bureaus came together and created the VantageScore. The most popular and most-widely used credit score is the FICO score. Banks and other business may have credit scoring calculations, but these generally aren’t available for consumer purchase.
What is the Credit Score Range?
No matter which credit score you use, the score you get is going to fall within a certain range. This credit score range represents the highest and lowest possible credit scores you can receive. Most people fall in the middle of the range and very few people are at the absolute high and absolute low ends of the credit score range. These are the ranges of the most commonly used credit scores:
FICO credit score ranges from 300 to 850. The same scale applies to both the Equifax BEACON and the TransUnion TransRisk score. Experian PLUS Score ranges from 330 to 830. The range for VantageScore, is 501 to 990.
In each case, higher credit scores are better than lower credit scores. Low credit scores indicate a higher credit risk. For example, if you have a FICO credit score below 620, it’s a sign that you’ve had serious delinquencies, high credit limits, too many credit inquiries, and other serious credit blunders. Lenders will be less willing to lend to you if you have a low credit score.
A good credit score range on the other hand is generally above 720. People with high credit scores are the most desirable borrowers because they have a greater
likelihood of repaying their bills. Consumers with high credit scores have likely paid their bills on time, borrowed only what they can afford to repay, and kept their credit card applications to a minimum.
According to FICO, the company who developed the FICO score, most people (58%) have a credit score above 700. Only 15% of the population has a credit score below 600.
How to Gain and Lose Credit Score Points
Your credit score can move up and down within the credit score range as you continue to spend money and pay (or not pay) your bills. Your credit score can move up when you:
- Pay your bills on time
- Keep accounts from going to a collection agency
- Charge only 10% to 20% of your credit limit
- Pay your loans down
- Use different types of credit including credit cards and loans
- Leave old credit accounts open
- Apply for new credit cards sparingly
On the other hand, you can cause your credit score to drop if you misuse credit by:
- Missing credit card payments
- Allowing accounts to be charged off
- Letting accounts go to collections
- Maxing out your credit card balances
- Paying your loans off slowly
- Having only credit cards or only loans
- Closing credit cards that still have a balance
- Disputing old accounts from your credit report
- Applying for several credit cards or loans within a short period of time.
Your credit score plays an important part in your life. So it’s important to focus on the good payment habits that build a positive credit score.