Understanding how to build or improve your score can raise a lot of questions. The most critical thing you must learn is what lenders are looking for in your rating. Plus, it’s vital to get insight into your report’s role and the steps you need to take to improve it.
Below, we elaborate on the most frequent questions about average credit histories and ratings. You’ll also get access to the ultimate credit score chart for 2021. All this will help you succeed in your journey to improve your personal finance rating in the eyes of lenders, employers, and landlords.
What Is a Good Credit Score?
Both most prominent consumer credit scoring models, FICO and VantageScore 3.0 offer credit score ranges. Accordingly, a good score is from 670 to 739 on the FICO and from 661 to 780 on the VantageScore.
Yet, lenders may have different criteria. For example, most banks tend to consider average credit scores of 700 and above to be acceptable. Plus, the best rates and terms are available for consumers in the very good or exceptional range.
Credit Score Charts: Data & Trends in 2021
Credit score charts can help you make sense of what can be a complex topic. These charts are there to teach you how your rating stacks up and how it affects your eligibility for different loan products.
FICO Credit Score Ranges 2021
FICO scores max out at 850, but any rating over 800 will place you in the exceptional bracket. This score will likely qualify for the lowest possible rates and credit cards with excellent rewards. Yet, since your score is constantly changing, keep an eye on it when borrowing.
Any credit scores between 740 and 799 belong to the very good category. These scores usually reflect behavior like on-time payments and a reasonable credit utilization ratio.
If you find yourself in the 670-739 range, you’re close to the average FICO score in the US. The good news is that an average FICO qualifies you for most loan products. So any score below this, or between 580 and 669, is fair.
Finally, a score below 580 means you are in the poor credit rating category. The upside is there is plenty of room to grow from here. Taking some simple steps can help you climb up the FICO ladder in less than a year.
Vantage Credit Score Ranges 2021
In the past, VantageScore’s scoring model differed from FICO®, ranging from 501 to 990. Luckily, current versions run from 300 to 850, making it easier to interpret, compare and manage scores.
VantageScore defines 661 to 780 as its good range. Any rating above 750 is excellent. In addition, if your score falls between 550 and 659, you may get approved for a credit line but won’t get the best rates. A score between 300 and 549 means you probably won’t qualify for personal loans.
What Is a Perfect Credit Score in 2021?
The highest scores for FICO or VantageScore cap at 850. However, most lenders consider scores above 720 excellent. Even if you have the highest score possible, it will be challenging to keep it month after month. Scores fluctuate due to many factors such as loans, payments, credit utilization, and credit history.
Both FICO and VantageScore claim that about 1% of their scores reach 850. They explain that people get perfect scores by practicing good borrowing habits for a long time. Plus, older consumers hit perfect scores more often than younger ones.
Why Having a Good Credit Score Is Important?
Your FICO credit score is a vital segment of your financial health. Indeed, a good score can grant you access to loans and better rates and terms. Getting a new loan often depends on a credit check, where lenders review your borrowing history. A good score can get you approved or otherwise endorsed and save you money over the loan life.
Applicants with higher FICO credit scores can shop around with multiple lenders to find the loan with the best rates. Less interest can save you a lot of money over time. For instance, reducing a mortgage interest by one percentage point can result in tens of thousands of dollars in savings.
Is It Possible to Get an 850 Credit Score?
Yes, it is, but the process is long and demanding. On the other hand, customers who achieve excellent FICO scores make payments on time, use loans lightly, and have an extended payment history. Here’s what perfect scorers have in common:
- No late payments on credit reports.
- Use about 10% and 30% of their credit limit.
- Borrowing history of nearly 25 years.
- Have several types of credit.
- Have no hard inquires on their report.
What Affects Average Credit Scores?
The scoring strategies used to calculate your rating are complex. But, overall, five factors define how your score will look like:
- Payment history: The way you tackle loan payments has the most significant impact (35%) on your rating.
- Credit utilization: The second decisive factor is the extent to which you use the available revolving credit. This segment accounts for 30% of your FICO score.
- Credit history length: The time during which you’ve been taking loans comprises 15% of your rating.
- Credit mix: The accounts of various types you own make up 10% of your score.
- New debt: New accounts and inquiries for loans round up the final 10%.
How to Improve Your Credit Score
Here is some practical advice on getting your credit score in superb shape. Regardless of whether you wonder how to improve your credit score after Chapter 7 or start from scratch, these steps will be of use.
- Pay your bills on time: Protect your score from the negative impact of missed payment by arranging autopay. Also, ensure your checking account has enough money to cover bills every month. This way, you’ll avoid sudden score dips due to a forgotten bill.
- Keep credit balances low: Set off to reduce any high-interest credit card debt first, as this costs you over the odds. In addition, reducing balances will show lenders you’re a responsible borrower.
- Avoid taking out many credit cards and loans: Applying for personal loans means a hard inquiry will hit your report and deprive you of several points. Avoiding multiple hard inquiries and opening credit cards you cannot repay. Instead, savvy borrowers apply for a few same-type loans to compare rates as scorers treat multiple credit inquiries around the same time as one.
- Remove mistakes on your credit report: Review your report in detail, and dispute any error you spot with all credit bureaus—correcting any issues will give your credit scores a lift.
- Keep old, paid-off credit accounts. When you no longer use an old credit card, keep it open to benefit from long payment history and high credit limits.
How to Check and Monitor Your Credit Score
First, go to annualcreditreport.com and get a free credit report from the three major credit bureaus. Then, check it for errors by reading the entire credit report thoroughly each year.
Next, sign up for free daily updates, credit reporting, and tracking with various online tools. This way, you’ll monitor any changes in your score, utilization rates, and alerts. Or, you can enroll for free via your online banking provider.
What if You Don’t Have a Credit Score?
Customers without a credit score may face challenges when applying for a loan. No borrowing history results from not using loans for over two years or traditional accounts at all.
Scores derive from statistical or credit scoring models that use your credit history to assign you a three-digit number. Without enough credit history, the algorithm won’t have enough data to assess you and give you a FICO score. Fortunately, you can always apply for no credit check loans and start building your financial image.
Most lenders set their credit ranges and criteria when making lending decisions. But if you know your spot in the FICO range, you can make informed guesses about your financial profile.
Moreover, you’ll better predict whether you qualify for lower interest rates and more favorable terms. So, use this knowledge while shopping for loans, and you may avoid submitting unsuccessful applications.