Your Credit Score - What Is A Good Number?

If you're thinking about applying for credit, it's always a good idea to find out what your current credit score is ahead of time. It will be one of the first things your lender looks at when reviewing your application. And it could well be a determining factor in how quickly your loan is approved. Knowing what your credit score is before you apply will help eliminate any surprises along the way.

So what is a credit score — and why is it important?

This is a number that's calculated by the credit bureaus to show how credit-worthy you are. It's based on your past credit history, as well as any current credit accounts you may have.

Trans Union, Equifax, and Experian are the three major credit bureaus lenders use. Each credit bureau has their own way of calculating your credit score, but they all report their scores using the same scoring method: FICO. FICO is short for Fair Isaac Corporation. Don't be confused if one person uses the term "FICO score" and another uses "credit score" — they both mean essentially the same thing.

The truth is, lenders won't always ask for credit reports or credit scores from all three credit bureaus when you apply for a loan. Fortunately, since the "big three" all use the same FICO system, a score of 680 from one is thought to be the same as a score of 680 from the other two credit bureaus. Even so, it's a good idea to review your credit report from each one, as sometimes mistakes are made. When that happens, you should contact the credit bureau to have them corrected.

Where Do You Fall - What Is A Good Credit Score?

Credit scores range from a low of 375 to a high of 900. If you have a higher score, you are usually considered a better "risk" and getting credit will be easier. You'll also find that higher credit scores usually mean better loan terms.

There is no standard scoring system that lenders must use when approving loans. They each have their own guidelines and cut-offs. But here is a general idea of the different ranges credit scores tend to fall in.

If your credit score is 650 and above, this usually indicates very good credit history. This means you will probably find getting credit approval is quick and easy. Another bonus for having very good credit is that the terms of your loan will likely be very good, too.

If your score is between 620 and 650, you are considered to have generally good credit. That said, your lender may ask for additional documentation or explanations before approving large loans or extending a high credit limit. They are simply doing their due diligence, looking for any possible credit risks before final approval.

Chances are good that you will be able to get credit at a good rate and decent terms. It's just that instead of quick and easy, it can take a little longer to get approval.

If your credit score is below 620, this doesn't necessarily mean you won't get credit. But you should realize that the interest rates and terms of your loan will probably be less desirable, due to your low credit rating.