Your credit rating helps determine whether you're eligible for a loan or other forms of credit. It also helps lenders decide what terms to offer you. Consumers with superior or excellent credit ratings can expect to experience few difficulties in securing a loan or receiving the best available terms.
One of the most commonly used credit scores is the FICO score, formulated by the Fair Isaac Corp. This score ranges from 300 to 850, with lower scores representing riskier borrowers and high scores representing reliable borrowers. Lenders use these scores to help determine if a borrower should receive a loan and what interest rates to offer. Each lender establishes its own criteria for loans, so what one lender considers excellent credit may be different from another lender,
Only a small number of consumers are able to achieve the top FICO score of 850, but in general anyone with a score above about 780 has superior credit, according to The Credit Scoring Site. Once you score in the upper 700s or 800s, lenders generally consider you to be in the top tier of borrowers and give you the best rates available, regardless of your actual score. So, for example, once you have a 780 score, you'll get the same benefits as someone with an 830.
Having a superior credit score gives you the best chances of getting a loan, but even a good score will make getting a loan much easier. The Federal Citizen Information Center reports that lenders consider anyone with a credit score above 700 to be a safe borrower. Those with scores below 700 but above about 620 can usually still get a loan, while those with scores of 620 or below are considered risky borrowers and face the most difficulty in securing credit.
People with good or superior credit have a much easier time of getting a loan and usually get the most competitive interest rates available. For example, if a credit card issuer offers a card with interest rates of between 10 percent and 18 percent APR, only borrowers with good or superior credit usually get the 10 percent rate. The lower your credit score, the higher the rate you get.
Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.