The FICO score is the number that creditors use to determine both your interest rate, and the types of credit programs for which you qualify. There are several FICO score categories that you can fall under, including excellent, good, fair and poor. To get a copy of your FICO score, contact AnnualCreditReport.com to obtain a free credit report from the three major credit bureaus: Experian, Equifax, and TransUnion. There may be slight discrepancies in your FICO score in the credit report offered by each bureau, but the score will generally fall within one of these categories:
Excellent CreditThe best FICO score that you can have is 850, which is practically impossible to earn. However, earning a very high credit rating is not impossible. To be classified as having an excellent credit rating you will need a FICO score of over 720 points. This credit rating will get you the best rates, the best terms and the best promotional offers from credit card companies and other lenders. To have this type of credit rating you’ll need to satisfy four basic factors:
- Longevity: the length of your credit history, the longer the better. If you’ve been successful paying off your bills for an extended period, this will significantly increase your FICO score.
- Responsibility: pay your bills on time, plain and simple.
- The type of credit: successfully paying off a mortgage has a better effect on your credit rating than paying off smaller loans.
- The size of debt: the amount of your overall debt should be 40% of your overall limit. The less debt you have, the better.
Good CreditThe second tier credit rating category is between 700 and 719. This credit rating will get you nearly the same treatment from credit card companies as excellent credit ratings. However, your interest rates may be slightly higher. If you are thinking about applying for a mortgage or other major loan, it’s a good idea to move your good credit rating into the excellent column. Average CreditIf your FICO score is between 675 and 699 then you will be rated as having average credit. This is the credit rating for the majority of consumers. Some lenders may restrict how much money they are willing to offer you, what types of credit you will be offered and your interest rates are going to be higher if you fall in this credit rating category. If you are applying for a mortgage then you will generally need to have a FICO score over 680 in order to qualify for a traditional home loan. Bad Credit, also called Subprime CreditAnything below 675 is Bad Credit. Though there are still opportunities for people with Bad Credit, in the form of bad-credit credit cards and bad credit mortgages, these are becoming less common. If you do have bad credit, you are guaranteed to pay higher interest rates as a way of offsetting the risk of taking you on as a borrower. In some cases, it may be wise to repair your credit before applying for a new loan.
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