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Credit Scores

What Is A Good Credit Score

Many consumers underestimate the importance of having a good credit score.  While most people understand that higher scores are needed to qualify for home loans, major credit cards, and car loans, they don’t realize that lenders base interest rates and loan terms on credit scores as well.  Borrowing money costs money and consumers pay much higher monthly payments and interest in the long run if they have low or poor credit scores.

What’s a good credit score?

Lenders each have their own opinions about what they consider a good credit score.  Most however agree that the magic number is somewhere between 650 and 700 on a FICO credit scale.  The FICO, which stands for Fair Isaac Corporation is the most commonly used credit rating scale in the credit and lending industry for companies who check credit score numbers.

Credit Score Scale

Credit scores under the FICO credit rating system range from 300 to 850.  The scoring system rates consumers based on payment history, total debt,  length of credit history, new credit, and type of credit.  Each of these areas are weighted in percentages and calculated to make up a consumer credit score.  All three major credit reporting agencies, Equifax, TransUnion, and Experian gather payment information about consumers from lenders, creditors, landlords, courts of law, and some utility companies. 

How Lenders Obtain Credit Scores

When banks, credit unions, retailers and finance companies request credit scores from each of the three major credit bureaus, they generally pay an extra fee for this information.  The FICO Corporation sells credit scores, or rather their proprietary formula to each credit-reporting agency. They in turn apply it to the consumer’s personal payment information reported by previous creditors to create a number between 300 and 850.   Creditors and lenders then have the option to subscribe to each of the credit bureau services and buy products such as, standard credit reports, credit reports with FICO credit scores, enhanced credit reports, and background checks that include employment history, military service, and criminal history.  Consumers requesting a free credit score check may obtain a free credit score report through this government website.

Average Credit Score From A Credit Score Check

The average credit score in the United States based on the FICO scoring model is currently 689.  This takes into consideration the lowest credit scores in the nation as well as the highest.  Some credit bureaus, such as Experian Corporation even release numbers to the public that reflect scores broken down by cities or regions in the country.

Besides FICO credit scores, there are other credit scoring models available to consumer lenders.  These include Vantage Scores developed by the three major credit bureaus, the CE credit score created by Experian credit bureau, the National Equivalency Score also offered by Experian, and TransUnion’s TransRisk score.  These scores may be used for educational purposes or sold to consumers directly.  The majority of lending institutions across the nation utilize the FICO scoring system to make most of their lending decisions for consumers however.

Why My Credit Score Matters

Maintaining high credit scores throughout your life not only allows you greater borrowing opportunities, but also saves money in interest in the long run.  Understanding the ways in which credit scores are obtained by lenders and the information they are based on helps in learning how to improve credit score ratings for future purchasing power.

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Jeff Dunphy

Jeff Dunphy has years of experience in the field of borrowing. He is the founder of a website that teaches consumers about credit cards, credit scores, loans, and credit repair.
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The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.