You might think the phrase credit score means a specific number that everyone uses, but really it is a very general term.  It actually is very generic, just think of what was stated above that there is 1000 different credit score models.  So in a lending situation you should ask what scoring model the creditor is using.

But the question is which ones or one should you really care about?  If there is an answer it would be your FICO score, which is the most widely used and trusted score today.  Chances are if you are going to a large purchase such as a home, your FICO score will be what your lender uses.  Now, this is a rule of thumb and there are exceptions.  And if you are not sure what they are using it is ok to ask.

So beyond the fact the FICO score is the most popular credit score model, it also makes up the general basis for the reasoning behind credit scores.  Meaning the same general areas of the FICO score calculation are found in other score.  So your payment history will carry the largest weight followed by your debt to credit ratio.  Etc..

Also, since a FICO score is just a brand of credit score, it is open to re branding.  This is the case with other scores you might of heard of such as the Beacon Score.

That leads to the fact if know where you are at on the FICO score scale you should have a pretty good idea where you fall with the other scores.  But it always does hurt to ask what your lender is using for a credit score model.

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One concept individuals need to understand about the FICO score range is scores are often pooled together. Meaning there are certain levels of scores or groupings that you will fall in. So no matter where you fall in the grouping you will get the same interest rates as others with higher scores in the same grouping. For Example let’s say that you have a 705, you would be included in the same group as all individuals that have a 700 to 759 on the FICO score range.

The implications of this pooling are twofold. One is the fact you might be in the lower end of a grouping but you will still qualify for the same types of loans as individuals several points higher. Also, to improve the interest rate you are getting you will to go to the next higher pool of scores.

Here are the most recent groupings of the FICO score range from MyFICO.

• 760-850 Excellent credit score
• 700-759 Very Good
• 680-699 Good/Average
• 660-679 Below Average
• 640-659 Fair
• 620-639 Poor
• 350-619 Bad

These groupings on the groupings are always subject to change. Also, these are general rankings and can vary from lender to lender. Meaning it is actually the lender that really determines what is good or excellent.

What kind of money could have a higher ranking on the FICO score range save you? If you look at charts comparing your credit score versus a mortgage payment it might seem like much. If we compare a good versus excellent credit score you will save around $26,000 on a $300,000 30 year mortgage. But when you start to think about all the credit in your life having a better credit score will affect all your lending. So you credit cards, auto loans, and personal loans will have a better interest rate and therefore it will really add up throughout your life.

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With both scales the higher the number the better the score you have.  The FICO score range is broken down usually as:

• 750 – 850 excellent credit score
• 700 – 749 good credit
• 680 – 699 good
• 620 – 679 fair
• 580 – 619 low
• 350 – 579 poor

The VantageScore assigns grades to different ranges on their credit score scale.  Here is the break down:

• 901 – 990 A credit
• 801 – 900 B credit
• 701 – 800 C credit
• 601 – 700 D credit
• 501 – 600 F credit

An important note to what is considered a good credit score is it is the lender who really decides what is good.  And since each lender has their own guidelines that they follow, it does not mean you will get the same deal or approved by every lender.

To make things even more complicated is the fact your credit score can and will vary on the information found on your credit report.  Since you have three credit reports you could possibly fall in three different areas of the credit score scale.

The general groupings above are always subject to change.  Also, depending on which group you fall in you qualify for similar interest rates and approval rate of everyone else in the group.  To see real benefit from improving your credit score you must make it into the next higher group.  Once again these are often set by the lenders and will vary lender to lender.

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