Wading through information on credit scores can be confusing, because there are few absolutes in the sector of credit scoring. One lender may view your score as high, while another could consider it too low -- and both could be right. Instead of zoning in on a score to reach, look at what your credit history contains.
Your FICO credit scores exist to tell lenders what a mathematical formula designed to rate the odds of you missing a payment says about you, not whether you are a good credit risk. So, one lender may view your 700 as an exceptional score and give you the best rate possible, while another could adjust your rate higher, because you do not fall into the highest class of credit scores.
Over time, lenders have settled on a fairly narrow range of scores that they consider the breaking point between a good and bad risk. Most creditors consider anything above 620 a prime or good risk, according to Bankrate. Above 700 means you are a very low risk borrower, and anything above 760 slots you as lowest risk, based on the FICO scoring model. An 850 is the highest score in the FICO system but next to impossible to reach. A score above 800 is elite and extremely difficult to obtain. Once you get below 620, almost anything is equally bad. Only 13 percent of U.S. consumers have a score below 600 and a borrower in this class tends to miss payments more than he pays on time.
Credit Report vs. Credit Score
Credit scores and credit reports are not the same thing. A credit score uses information in your credit report to quantify you as a risk. Thus, you should examine your report for negative information to find out why you have a low score. A single negative item usually has a much larger impact than a single positive item. If you have a low FICO score, there are probably several missed payments and maybe some delinquent accounts, such as a collection account, charge-off or even a bankruptcy.
The only way to gauge whether you have a high or low credit score is to see what a lender thinks of your credit. You can apply for mortgages, student and auto loans as many times as you want in a 45-day window and have it count as only a single inquiry. Ideally, you should become current on any past due accounts and eliminate as much debt as possible from your profile before submitting an application.
Russell Huebsch has written freelance articles covering a range of topics from basketball to politics in print and online publications. He graduated from Baylor University in 2009 with a Bachelor of Arts degree in political science.