Higher is always better, but there are certain ranges you need to qualify and secure good interest rates.
When it comes to credit scores, FICO scores are the most commonly used by lenders; they’re used in 90% of financing decisions. However, this is not the only score you have. Different credit bureaus, lenders and credit agencies have their own scoring models. The ranges for these scores and what is considered a good credit score varies based on which credit score you use.
The second most common credit score is called the VantageScore. It’s the scoring model used by the credit bureaus. In this article, we’ll give you ranges for both FICO and VantageScore, so you have the most complete information possible. For other scoring ranges, please refer information from that specific scoring provider.
What is the highest credit score? What’s the lowest
FICO scores range from 300 to 850. It’s very rare to have the highest credit score or the lowest – almost every person will fall somewhere in between.
For VantageScore, there have been two models used. The previous model ranged from 501 to 990. However, VantageScore 3.0 that’s used today matches FICO. It ranges from 300 at its lowest point to 850 at the highest point.
Establishing each credit score range
Ranges also vary based on which score you’re using. Here are the ranges for FICO scores:
|FICO Range||Credit Score Designation|
For VantageScore 3.0, the designations assign value based on prime versus subprime. Here are the ranges for VantageScore 3.0:
|VantageScore 3.0 Range||Credit Score Designation|
What is prime credit?
For lending purposes, you want a score that’s either prime or super prime. Anything below that means that you are considered a subprime borrower. As a result, you pay higher rates and may not get approved for traditional financing. Subprime lending is riskier, because borrowers are more likely to default. As a result, the lending products you can use cost more and have stricter terms.
For example, adjustable rate mortgages (ARMs) are one tool that make it easier to qualify for a mortgage. However, ARMs were a major contributor to the the mortgage crisis of 2008. When the real estate market took a turn for the worse, the rates on these loans went sky-high and the values of the loans dropped. Millions of subprime borrowers ended up with loans they couldn’t afford on houses they couldn’t afford to sell.
If you are subprime, it doesn’t mean you should avoid credit and loans entirely. However, you should always borrower carefully, to make sure you can afford the loan despite any changes to the economy.
What credit score is needed…
Q: What credit score do I need to buy a home?
A: In general, you need a credit score above 620 to qualify for a traditional fixed-rate mortgage at a good interest rate. To qualify for an ARM, you generally need at least a 600.
However, there are programs available that help first-time homebuyers overcome challenges like low credit. With financing through the Federal Housing Authority (FHA), you can qualify for financing with a score as low as 560.
NOTE: Just because you can qualify, it doesn’t mean you should borrow! You pay higher interest rates, which on a mortgage equates to thousands more paid over the life of the loan. Always consider total cost and monthly cost carefully before you take out a loan.
Q: What credit score do I need to buy a car?
A: Auto lending is pretty flexible as financing goes. You can find auto loans for bad credit that allow you to finance with a score as low as 500. However, these loans can be extremely risky and the rates can be extremely high. In fact, sometimes your rate can be so high that you barely pay off principal as you make payments; your payments barely make a dent in the debt you actually owe.
In general, you want to have a score of at least 600. For a new car, we recommend having a score above 661 so you’re in the prime range. For used cars, near prime is generally acceptable, so that’s anything over 600.
Q: What’s a good credit score for leasing?
A: Leasing generally follows the same scoring ranges for buying. A lease is effectively like a loan, so the lender still wants to asses your creditworthiness. In general, you want a prime score or good score for a good rate – anything above 660. However, anything over 600 may be acceptable.
Q: What credit score do I need for a credit card?
A: Credit cards are also generally flexible when it comes to scoring. In fact, there are cards available for people who have rock-bottom bad credit. These secured credit cards are designed to help you build credit if your score is less than 500. You make a cash deposit to open the account and get a credit line equal to your deposit. You can open these accounts even with a score of 400 or less.
For traditional unsecured credit cards, you generally want a score over 600. If your score is over 700, you can generally qualify for any card you want. However, to get those great advertised credit card offers, you need a score of 720 or more. Only excellent credit scores enjoy the best credit cards at the lowest rates.
It’s also worth noting that you should periodically call to renegotiate interest rates when your credit score improves. You don’t technically refinance credit card debt. Instead, you generally just request an interest rate reduction. Anytime your score improves significantly, call your creditors to negotiate interest rates.
Q: What credit score do I need to refinance?
A: In addition to negotiating credit card interest rates, you should also consider refinancing loans if you credit score improves. You can refinance a loan to get a lower interest rate, which saves you money over the life of the loan. However, just be aware that refinancing can incur additional charges, such as closing costs when you refinance a mortgage.
Article last modified on August 3, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: What is a Good Credit Score? - AMP.