What are the Different Credit Score Ranges? Bad to Excellent and Everything In Between
Financial experts constantly encourage us to build and maintain good credit. The trouble is, they don’t always explain the what and the why behind that advice. A little additional information can go a long way in helping you take your credit score to the next level.
What is a credit score?
Your credit score is a 3-digit number that reflects the information on your credit report, a document that details your personal history with handling borrowed money. The purpose of your credit score is to help lenders evaluate how risky a borrower you are.
The most commonly used credit scoring algorithm in the U.S. is produced by the Fair Isaac Corp. FICO scores range from 300 to 850: the higher the score, the better.
Every lender sets its own standards for what constitutes a “good” FICO score. But, in general, FICO scores fall along the following lines:
300-629: Bad credit
630-689: Average/fair credit
690-719: Good credit
720 and up: Excellent credit
To build and maintain a good score, it’s essential to start using credit responsibly as soon as you can. This means paying your bills on time, keeping the balances on your cards low, and applying for new credit sparingly.
Why your credit score matters
Your FICO score is one of the most important data points lenders look at when they’re deciding whether to give you a loan or a credit card. Additionally, it’s used in determining the interest rate you’ll pay on loans you qualify for. The higher your FICO score, the more likely you are to get credit on affordable terms.
Keep in mind that your credit history is used in other finance-related situations, too. For example, many landlords run a credit check before deciding whether to rent to you. Also, most car insurers use a credit-based insurance score when determining your rates.
Consequently, keeping your credit in good shape should be a top priority.
A credit card for every score
One of the easiest ways to build or rebuild your score is getting a credit card and using it carefully. But your current credit will hugely influence the card you’re able to get. Here are some options to consider based on your FICO score:
If your credit is excellent: Citi®Double Cash Card
The Citi®Double Cash Card also comes with an introductory APR deal. You’ll pay 0% on purchases and balance transfers for 15 months, and then the ongoing APR of 12.99% - 22.99% (Variable).
Also, the Citi®Double Cash Card provides free monthly access to your FICO score. This is a great way to be sure your credit is staying in “excellent” territory.
All of these perks come at an annual fee of $0, which is another example of how having outstanding credit can help you save.
If your credit is good: Chase Freedom®
The Chase Freedom® also comes with an introductory APR promotion. You can expect to pay 0% on purchases and balance transfers for 15 months, and then the ongoing APR of 13.99% - 22.99% (Variable)
Unlike many cash-back cards, the Chase Freedom® comes with a signup bonus: get a $100 bonus after spending $500 on purchases in your first 3 months from account opening Its annual fee is $0.
If your credit is average: Barclaycard® Rewards MasterCard®
Like the Citi®Double Cash Card, the Barclaycard® Rewards MasterCard® provides free monthly access to your FICO credit score, so you can track your progress toward improving your credit over time. Its annual fee is $0, so getting on the road to excellent credit won’t come at any additional cost.
If your credit is bad (or nonexistent): Capital One® Secured MasterCard®
When your credit history is poor or limited, you’ll likely have to opt for a secured credit card. This type of plastic requires an up-front cash deposit to “secure” your credit line in case of default. But otherwise, it functions exactly like an unsecured card. Over time, if you spend responsibly and make on-time payments, your credit will improve and you’ll be able to upgrade.
A good secured credit card is the Capital One® Secured MasterCard®. Its annual fee is lower than similar cards at $29. Your payment history and other account activity will be reported to the 3 major credit bureaus every month, so if you use the card responsibly you can expect your FICO score to increase over time.
The Capital One® Secured MasterCard® also stands out from the secured card crowd because you might be able to get a credit line without putting down a bigger deposit if you manage your account carefully. If you make the right moves, this card could be a valuable tool for getting on the fast track to good credit.
Lindsay Konsko is a staff writer covering credit cards and consumer credit for NerdWallet. Follow her on Twitter @lkonsko and on Google+.
Image via iStock.