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Whether you can qualify for a loan, how much you can borrow, and how much you pay to borrow money depends in large part on your credit score. Most top lenders use a credit scoring method known as FICO, which was developed by Fair Isaac and Company more than a quarter century ago. This scoring method takes into account a number of different factors, including your payment history, your percentage of credit utilization, as well as the number and type of accounts that you have open.

Credit Score Ranges:

While there are several different versions of the FICO score, the model used by most lenders ranges from a low of 300 to a high of 850. A higher credit score gives you access to more credit products as well as lower interest rates.

  • A FICO score of 300 to 629 is typically considered poor credit. You may still be able to find lenders willing to extend credit even with a credit score in the 500s; however, these loans typically come with high interest rates or other stipulations. A low credit score can even affect how much you pay for car insurance or the size of the deposit required for an apartment or utilities.
  • FICO scores between 630 to 689 are considered average. Most mortgage lenders require minimum credit scores within this range to be considered for a home loan.
  • You are considered to have good credit if your score is between 690 and 719. If your score is within this range, you should be able to qualify for mortgages, credit cards, and other loans relatively easily.
  • If your FICO score is 720 or greater, you have excellent credit. Individuals with scores above 750 can typically qualify for zero percent interest on credit cards and car loans.

A second scoring algorithm called VantageScore, which was developed by the credit bureaus, was unveiled in 2006 and is becoming increasingly popular. Both FICO and VantageScore look at comparable criteria, so your score should be similar regardless of the method used.

It is normal for your credit score to fluctuate slightly over time. As long as the score does not fall outside of a healthy range, you should not notice any difference in your overall financial well-being.

If you are considering applying for credit card, mortgage, or car loan, it is important to remember that your credit score is just one piece of the puzzle. Potential lenders will also look at your income, amount of debt, and other assets in determining whether to extend you credit. If you need help improving your credit score you may have to use credit repair services if it isn’t something you can do on your own.