People are concerned about their Fico score, and for a good reason. They keep asking what a good credit score range is, because they understand that their credit score has a huge impact on their financial life.
The answer is not straight forward. So let’s start from the basics.
As you probably already know, Fico, Vantage and all the other credit ratings divide their credit score scale into 5 or 6 ranges:
|FICO Score||Vantage Score|
|Fico Score||Grade||Vantage Score||Grade|
|700+||Excellent||900+||A – Super Prime|
|680-699||Good||800-899||B – Prime Plus|
|620-679||Average||700-799||C – Prime|
|580-619||Low||600-699||D – Non-Prime|
|500-579||Poor||501-599||F – High Risk|
So what can you learn from this table? Actually – nothing. It says nothing about the terms you can get on a home or car loan, let alone whether you can actually get approved or not.
The following table tells much more – they demonstrate what kind of terms you’re likely to get for an Auto loan, Home Equity loan or a Mortgage:
|30 Yr Fixed Mortgage||15 Yr Home Equity Loan||36 Months Auto Loan|
|760-850||3.251%||Best Rate||740-850||5.850%||Best Rate||720-850||3.249%||Best Rate|
|Based on National Interest Rates as of 4/1/2016|
As you can see, there’s a better differentiation between Fico score ranges, and it goes without saying that the better score you have – the better terms you’re likely to get.
My Score is 710 – Does this guaranties that I get good rates?
No it doesn’t. Unfortunately, life is never that simple.
First, is your score a Fico? If it’s Vantage, Beacon, Empirica, Pinnacle or any other score than the above table doesn’t imply for you.
Second, even of your score IS Fico, the score you see and the score that your lenders see are totally different, and can be off by more than 100 points!
Mortgage lender uses a different version of Fico formula (called ‘Factual’) that is especially adapted to their needs. Car dealers have their own version called ‘Auto Enhanced’ (See Understanding FICO Scores for more information).
The score that you as a consumer can get is a generic version of Fico, and can be more than 100 points off from that your lender see’s. As the table above demonstrates, 100 points mean a lot!
My car dealer see’s a 710 – Does this guaranties that I get good rates?
Unfortunately, the answer is still no. Good credit score by itself is not enough, because credit score is only a very small part of the credit process and is reallyh NOT that important.
First, most creditors will examine your credit file itself. For example, to get a mortgage you will need a clean credit report, regardless of your score. A 680 score with a clean file is preferable to a 710 score with an old default/charge-off (a realistic scenario, because 90% of your Fico score is determined by the last 2 yrs of credit activity).
Second, there is no single “score cutoff” used by all lenders, so it’s difficult to say what are good credit scores outside the context of a particular lending decision. For example, one auto lender may offer lower interest rates to people with FICO scores above 680 while another auto lender may use 720. Your lender may be able to give you guidance on their criteria for a given product.
Third, when making a lending decision, many other factors come into effect. These include:
- The term of the loan (the shorter the better)
- Your employment status (time on job / job stability)
- Your income (may be too low or unpredictable if you’re self-employed)
- Your credit profile (the deeper & diversified – the better)
- Size of down payment (bigger = better)
- Time at residence (longer is better)
- Amount of finance compared to book value (Lower is better)
In addition, other factors related to the securities come into consideration (E.G. Age of vehicle & Miles on it in case of an auto loan).