What Does Your Credit Score Mean?

Credit score

One of the biggest questions that many people have about their credit is what it means to have good credit, fair credit, bad credit, or excellent credit. How do you know that your credit score is excellent? There are any people who believe that a score of over 650 is a great score, but it’s not. There are those who are not even sure that 500 is a bad credit score. The truth of the matter is that it really does depend on which credit bureau you are discussing, your credit history and your number. It should be a very cut and dry process but it’s not. It would be simple if everyone just worked with the same guidelines but they don’t.

Unfortunately, it seems that many people aren’t able to get a straight answer. If you don’t believe me, Google it. You’ll come up with thousands of results and not one of them will provide you with the same answer. That’s because you just don’t have one unless you know which company you’re looking to check and precisely what your score is – of course, your score might different from credit bureau to credit bureau. To make this situation even more unfortunate, the score you have might be excellent with one credit bureau, and it might only be good with another. You just don’t know. We can’t tell you what your score means everywhere, all the time, but we can tell you that it does mean something to everyone. Here’s a basic guideline.

720 and over – Excellent Credit

This is the kind of credit that you want. It’s excellent, it means that you have a wonderful score, that you have a very good repayment history, and you probably have very little debt. Of course, it’s entirely possible to have excellent credit and still have debt, so long as it’s minor and you do make more than the minimum payment every month, on time, all the time.

690-719 – Good Credit

Good credit is not bad. I know, that seems pretty obvious, right? But it’s also not excellent. It means you have a good history of using your credit and your finances, and you probably make your payments on time. You might have more debt to income than others, you might have had a few mistakes on your report in the past, and you might have a few credit issues that affected you in a negative light. However, that does not mean that you don’t have some seriously good credit going on. It’s not even that difficult to raise your score to excellent depending on where you fall in this range.

630-689 – Fair Credit

Fair credit is not necessarily the best. Most people with fair credit have some debt, they have too much money borrowed. They might have made some late payments, missed some payments, they might be working on building their credit score. There are a lot of options here, and a lot of people find that they are in the fair credit zone after a hardship.

300-629 – Bad Credit

What you will notice here is that there is a bit number of 329 points in the bad credit range. There is not this much wiggle room in the fair, good or excellent categories, but that’s a topic for another day. To have bad credit means you have a poor history of making on-time payments, you probably have a lot of debt, you probably missed payments and you probably have very high balances on your cards and your other revolving credit Now is a good time to take it into consideration that some debt counseling might be for you.

Why your score doesn’t always matter that much

Don’t get me wrong, your credit score matters more than any other number in your life. However, you might be surprised just how many lenders look at other factors in addition to your credit score. For instance, a lender might be happy to provide a loan to someone with fair credit who shows that they have made a mistake and come back from it with a year or more of on-time payments and payments that are well above the minimum amount due.

That same lender might not be willing to provide a loan to someone who has good credit but is maxed out on all their cards and only makes the minimum amount due each month when the payment is due. It all depends on where you’ve been, what you are doing and how well you are managing your credit. It’s not something that we can necessarily promise you, but lenders do look favorably at applicants with fair or even bad credit if the bad or fair part is in the distant past and the most recent years are filled with good payments and over the minimum payments.

Photo by Getty Images