The FICO score is one of the most crucial numbers that define your financial identity. This three-digit number ranging from 300 to 850 is your key to qualifying for credit cards, car loans, mortgages, apartment rentals, and much more. It also determines the interest rates and terms that will be given to you in the future. So, what FICO score is desirable to achieve to get the most favorable interest rates and loan approvals? Below is a brief description of what is considered an excellent, very good, good, fair, and bad FICO score.
A FICO Score of 800 or Above is an Exceptional
A FICO score of 800 and above is regarded as excellent and will help you get the best interest rates offered by lenders. As stated by myFICOcom, a FICO score in this range is rare as only less than a percent of the population can boast of this score. It means that if your score is this high, lenders will perceive you as having excellent credit and a low possibility of failing to pay back the loans. Possibly you will be given the best interest rates and this means you will be charged way below what you would have been charged had you taken a personal loan.
There will also not be any problems in getting approved for almost any credit product that you may apply for. Whether you desire a high-end travel credit card, a large mortgage to purchase a large home, or the ability to lease a luxury car, a FICO beginning with the number will be your key. The high credit score is an indicator to the lenders that you are a good credit user and the monthly payments will not be missed.
A Very Good FICO is or Higher
The next lower level in FICO scores’ range is from to. Albeit not as high as a score of or higher, a range within means that the performance is still very good. As provided by myFICO, a percentage of people belong to this credit score range.
Even with a FICO score of very good, you will be able to secure the best interest rates from most of the lenders though they may not be as low as those offered to clients with an exceptional credit score. You should not have a hard time getting approval for most of the loans and credit cards that you apply for. If your score is within this range, then it is most likely that you will have to spend some more time searching for better rates.
In general, a FICO score of two means that you are a very responsible borrower and most lenders can be assured that you will always meet all the payment obligations on your credit balances. That is why you should be able to obtain a great number of cheap sources of financing.
A FICO Score of to is Good
The next step down leads to the good credit score range, which FICO describes as. It is estimated that of the population in this region, a percent of individuals possess credit scores.
If you have a good FICO score, you will be able to borrow most of the loans and credit cards at reasonable rates of interest. Approval may entail providing security in case of a large sum such as for a house or a car. The interest rate might be just slightly higher than the interest rate offered to someone with very good credit. You will be seen as a moderately responsible borrower able to deal with the required monthly payments on debts.
Although having access to credit is easy because of a good credit score, one needs to spend some time to find the best rates. In the case of a loan or credit card, prime borrowers with higher scores will tend to be charged lower rates on a given loan or credit card. However, taken in an overall context, a good FICO indeed offers adequate numbers of cheap credit facilities.
A FICO Score of to is Considered Fair
We then have the fair credit, which is a FICO score of between and. The following is the distribution of credit score ratings of the people in this area of the country:
Still, it is possible to get approval for loans and credit cards with fair credit. However, be prepared for pledging security for large amounts of credit and relatively higher costs in the form of interest on most of the credit facilities. You may also experience reduced maximum credit card and other revolving credit available to you.
Thus, for a lender, fair credit means a higher probability of non-payment or default. Therefore, they will need to be provided with any form of security in the approval of any large amounts of loans. The interest rates will also be higher to ensure the lender is adequately protected from non-payment of the loan.
On the positive side, a fair credit score does allow you to have access to credit and this enables you to purchase the requirements of life while at the same time developing a credit history. You just have to be prepared to pay a higher interest rate than individuals with good or better FICO ratings.
A bad credit score is below Last, we have the bad credit territory, a FICO score below this. It is found that about a percent of consumers fall into this category.
Having a bad credit score is not a good thing especially when it comes to getting cheap loans or credit cards. Most traditional banks will consider such applications as high-risk and will outrightly reject them. The few lenders that will be willing to finance consumers with poor credit scores will charge very steep charges on their interest rates. Credit amounts can also be considerably below what is required or demanded.
A low credit score below marks a consumer as a risky borrower who may default in payments on the loan and other debts. Hence, they will be charging high rates based on the increased risks or simply refusing to offer loans to individuals with low scores.
However, even those with poor credit ratings do not entirely lack options; they can take secured credit cards, credit builder loans as well as subprime personal loans from companies that offer credit to less fortunate clients. Such products, if employed rigorously as necessitated and repaid in due time, provide consumers with a way to gradually regain their credit scores and consequently a firm FICO rating in the long run.
Regularly Checking Your Scores You have already seen that there are levels of credit scores starting from excellent to bad. The loan rates and approvals for which one qualifies depend on where your FICO score stands in these ranges. Therefore, getting your latest scores for all three credit bureaus should be routine.
It is suggested by most professionals to check your credit reports and FICO at least once a year and more often if you plan on upgrading your credit. This lets you track your progress, detect any suspicious activity at an early stage, and access your scores as lenders see them when approving your loan or credit card application.
There are a lot of free and paid services that offer to check your credit reports and FICO scores from Experian, Equifax, and TransUnion on-demand. So, it is advisable to use these resources to keep a check on your reports from time to time.
With the knowledge of your current FICO score and a desired number, you take the appropriate actions through your financial behavior today to achieve and sustain the score that affords you and unlocks better financing terms today and in the future.
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