In the eyes of a lender your credit score is the most important when it comes to giving not only approval, but to decide your interest rate and terms that come along with the product. The difference in a few percent could change a monthly payment by hundreds of dollars depending on the size, so it is important to have the highest score you can. It’s so important that many people with sub-par scores tend to utilize the best credit repair services out there just so they can improve their financial outlook going forward.
FICO is the most widely used scoring model, with the worst starting at 300 and the highest being 850, with the range as follows:
Very Good: 750-799
Very Poor: 300-599
What do Those Ranges Mean?
In the “Excellent” range, you have done a great job managing your finances and you are rewarded with pretty much a guaranteed approval and the best possible interest rates and terms that are available.
Typically, a “Very Good” borrower is not much different than “Excellent”, so from scores below this is where you will start to notice a significant difference the lower the scores go.
“Good” will get you approved, you just will not have the lowest rates that will be awarded to “Very Good” and “Excellent”, with the real problems starting next.
“Fair” is average, and probably will be approved, but by the skin of your teeth, going through a lengthy approval process to show you are on the right track and are worthy of approval, only to receive higher rates and fees.
“Poor” is usually referred to as having bad or subprime credit, and with your troubled history, may have to require a co-signer to prove your worthiness, and selling your soul to the lender’s terms.
“Very Poor” leaves you with very few options, so instead of pursuing approval right now, time should be spent improving credit now.
Where do you Rank?
Most creditors are now providing credit scores in the monthly statement, or clickable in the online account, so can view pretty easily where you fall. If you are not able to view for free, you can purchase your credit score through one of the credit bureaus or third-party sites. It is important to view a copy of your report each year to check for inaccuracies anyways, so although a score is not included, now would be a good time to request a free copy of your credit report through any of the bureaus, and request annually going forward.