credit score scale
Credit Score Scale
The widespread use of loans and credit cards demands the necessity of a credit score scale. The evaluation of an individual's credit score depends on his/her past payment history.
- This model includes 5 important elements while deriving the score.
- The first element is payment history, which constitutes 35% of the number. It consists information about your past payments.
- Timely payment has a positive effect on the entire score.
- The second element is the amount that is owed as of date, which accounts to 30%.
- Too may accounts that are owed result into a negative number.
- The third aspect is the length of the credit history and contributes to 15%. A long history is a down right negation.
- 10% of the score is made up of new amounts borrowed.
- The last 10% is contributed by the different types of credit.
- The FICO rating is basically a numerical between 600 and 850.
- The credit scale, when arranged in an ascending manner, gets segregated into 6 different classes with the poorest result beginning from 600, and the best being 850.
- This result is principally used to derive interest rates, terms and conditions of the loans, and is also used as a primary guideline in the process of approval of loan, credit card, or a debt creation facility.
- If you surf through different websites, you will find a considerable number of ratings, like good, bad, and poor.
- These are the categories of scores that are used by lenders and companies to decide the approval and interest rate of a credit-related facility. The following chart will give you a brief idea about the significance of these categories.
Credit Score | Rating |
760 to 849 | Excellent |
700 to 759 | Great |
660 to 699 | Good |
620 to 659 | Fair |
580 to 619 | Poor/Bad |
500 to 579 | Very Poor |
- There are certain implications of these categories.
- A very poor rating means that you have a staunch possibility of facing denial for loans and credit cards.
- A poor rating means that you will be subject to higher levels of interest.
- Both the above categories are deemed to be bad categories, and those who have such ratings can avail bad credit loans.
- A fair rating has a good chance and priority in getting loans.
- The people belonging to the good and great score can not only avail loans and credit cards quickly, but also have the advantage of lower rates of interest.
- The best category is of course, the excellent rating, which is deemed to receive the best rates of interest and almost instant approval.