Here are some quick facts I'd like to share that I think everyone should know regarding credit.
The Magic Number
Did you know that although an 800+ credit score is considered Excellent credit, a score of 740 will usually qualify you for the best interest rates?
Staying Within Range
As you begin to learn more about credit scores you will find that the score ranges for what is considered excellent, good, fair and bad credit vary among credit reporting companies.
In my opinion, when in doubt and trying to be strategic in securing the best interest rates, refer to the FICO score range when setting your score goals because they tend to be more stringent.
FICO Score Ranges
300-579 - Very Poor
580-669 - Fair
670 - 739 - Good
740 - 799 - Very Good
800+ Exceptional (Excellent)
Credit Lending Is Risky Business
Did you know that every potential borrower has a risk profile?
Well we do, and that profile is created based on your credit history file and used to determine what type of credit risks you pose to potential lenders.
'There's Levels To This'
Did you know that there are five credit score levels/categories when speaking in terms of a credit score?
The CFPB (Consumer Financial Protection Bureau) classifies the five types of borrowers:
Deep subprime (credit scores below 580)
Subprime (credit scores of 580-619)
Near-prime (credit scores of 620-659)
Prime (credit scores of 660-719)
Super-prime (credit scores of 720 or above)
*Some bureaus consider a 740+ score super-prime.
Every person with a credit profile falls under one of these categories, by knowing your borrower classification you can strategically look for the best opportunities that fit your profile and limit your chances of being declined for credit and avoid unnecessary inquiries.
The 3 Big Credit Bureau Bosses
Did you know that Equifax, Experian & TransUnion each have their own score ranges?
While there are other credit reporting agencies that supply versions of your credit report to potential lenders, these three companies are the ones that primarily collect and distribute the information that is used to determine credit lending outcomes.
Here are the score ranges for each bureau:
Equifax 280 to 850
Experian 300 to 850
TransUnion 300 to 850 (*150 to 950 for insurance scores)
How do you keep your credit score high?
There are five factors that make up your credit score:
Pay all credit accounts ON or BEFORE time and Pay Them Off in full each month (if possible)
The Amount You Owe
Keep your credit utilization low (don't use up too much of your available credit at once)
*Only using up to 30% is the industry standard recommendation
The Length of Your Credit History
Keep your oldest credit accounts open and active (the average age of your credit makes up 15% of your score)
New Credit Opened
Keep the number of inquiries to your credit as low as possible (when you aren't making strategic moves)
*I'll explain this later when we talk!
Types of Credit You Have
Mix up the kind of credit you have on your report
(for example: a person with a credit card, car loan, mortgage loan and unsecured loan has a good "mix of credit")
If you learned something new and would like to know more, click this link and Let's Talk!