Your credit score can make or break you financially. A good to excellent score of 690 to 850 qualifies you for low interest rates, while a poor credit score below 630 can cause you to pay much higher interest rates if you can get a loan at all. If you have a fair credit score -- which ranges from 630 to 689 -- you'll receive interest rates in the middle of the spectrum.
All three major credit bureaus -- Equifax, Experian and TransUnion -- generate credit scores based on credit reports they compile. These scores are based on the software originally designed by the Fair Isaac Corporation, but the scores may vary from bureau to bureau. Credit scores range from 300 to 850. The score ranges break down into excellent, good, fair and bad credit. Excellent credit runs from 720 to 850, good ranges from 690 to 719, fair goes from 630 to 689 and bad is any score below 630.
If your score falls in the fair range, it is important to prevent if from falling any further. If your score declines below 630, it will be much more difficult to qualify for credit, and if you do, it will cost you more because you'll be charged a high interest rate. Typically, when your score stays in the fair range, you have minor issues on your credit report that -- if fixed -- will lift your score to the good or excellent range.
If you're making all your credit card and loan payments on time, the best thing you can do to improve your score is to adjust your credit utilization ratio. This ratio compares the amount of credit you use to the amount of your available credit or the credit limit on your credit cards. For example, if you have $1,000 of credit available on your credit cards and carry a balance of $500 each month, you're using 50 percent of your available credit. To improve your credit score, use 30 percent or less of your available credit. It's OK to charge more, but pay down the balance to 30 percent by your billing due date.
Credit Score Simulators
A credit score simulator can be helpful when you are trying to improve a fair score. This feature illustrates out how taking certain actions will affect your credit score. For example, you can adjust the balance on your credit card account and the simulator estimates how many points your score will increase or decrease, or you can see how much your score goes down if you miss a payment. If you have a fair credit score, you need to stay on top of your credit report to keep your score from going into the bad range and to move it into the good range. MyFico.com, Equifax.com and the other bureaus include the score simulator with their credit-scoring products. Typically, you can get all three credit reports, your credit score and the score simulator for about $20.
Chris Brantley began writing professionally for a financial analysis firm in 1997. From 2000 to 2004, he worked as a financial advisor, specializing in retirement planning and earned his Series 7, Series 66 and insurance licenses. Brantley started his full-time writing career in 2012 and has written for a variety of financial websites, including insurance, real estate, loan and investment sites. He holds a Bachelor of Arts in English from the University of Georgia.