Credit Score Range

The FICO or (Fair, Isaac and Company) was developed in 1958 and was used by the FICO company has a scoring system. 1987 saw the first introduction of the FICO score range, and was picked up by Equifax. Since that time all credit reporting agencies follow this scoring system. The scoring system is set up with a relatively easy numbering system that is based on your credit performance.

This 3-digit number can be measured in many different ways, and you are not simply rated on defaulting on credit obligations. For instance, if you're living beyond your means yet you are still making all of your payments but may have not fallen a bit behind, you are what's called overextended. This can also have a negative effect on your FICO score.

Keeping this in mind we will look at the credit score ratings using the FICO rating system - as follows:

720-850 - This is the best possible score you can receive
700-719 - Still quite favorable for financing terms
675-699 - This is still a good score range
620-674 - You may have some trouble getting the rates you require
560-619 - You will face some credit issues
500-559 - Your focus should be on raising your score

Credit scores are looked at in a number of different ways and to be frank; using the FICO system doesn't take into consideration all the credit information that has been reported to all three credit bureaus. These credit bureaus use the same scoring system and normally come up with different scores. The reason for this is some businesses or companies report to one credit bureau over another so they do not receive the same information about your credit history.

Let's assume they do and they are going to grade you based on each category that they report on. They would then use a percentage from each category to total the complete score such as:



Your history of payments - 35%, how much you owe - 30%, term of credit history - 15%, brand new credit - 10%, and what type of credit used - 10%, this makes up 100% of your total score. If you are lacking in any of these areas this is when your credit score can affect your ability to procure new credit.

Getting back to the big three credit bureaus, they will almost always come in with a different number so it is in your best interest to acquire your credit report annually to find out what is being reported and if the information is correct or not.

Now, because of the credit scoring inconsistencies the three major credit reporting bureaus have coupled with a process called VantageScore which uses a number range (501 to 990), which is different from FICO score (that uses a scale of between 300 to 850).

VantageScore allows lenders and creditors to see the whole picture instead of sifting through the uneven numbers and base your credit worthiness on the whole picture and not bits and pieces of duplicate information. This is a better process and in the end is a bit more practical.

Credit scoring is not a new concept and in the days before FICO came around, lenders really used their own systems to grade an individual's credit.

Whatever you do, always check your score before you apply for a loan or line of credit. Clear up any problems, which will make that new vehicle or installment loan a lot more affordable.

Although under the federal law, you're entitled to receive a free copy of your credit report annually from any of the 3 credit bureaus - Equifax, Experian, and TransUnion, this free report will not reveal your actual credit score.