Your credit rating is a vital part of your financial portfolio. When a credit bureau assigns you a score, based on data such as your payment history, amount of debt and credit limits, potential lenders consider this score before extending credit to you. Some prospective employers and landlords may also review your credit score before making hiring or rental decisions. Although there are numerous credit bureaus and various scoring models, the Consumer Financial Protection Bureau (CFPB) notes that lenders most often use FICO® scores, developed by the Fair Isaac Corporation.
What is Fair Credit?
Based on the FICO credit scoring scale, a “fair” credit rating falls between 580 and 669 on a scale from 300 to 850. This grade includes approximately 20 percent of
What Is Considered a Good Credit Score?
The FICO scoring scale rates a “good” credit score as falling between 670 and 739. This category includes approximately 21 percent of
What Is Considered a Poor Credit Score?
In the lowest rating on the FICO scale, a “very poor” score falls between 300 and 579, representing 16 percent of
By federal law, the Fair Credit Reporting Act (FCRA) gives you the right to get free copies of your credit report. You can request one free copy every 12 months from each of the three largest nationwide credit bureaus – Equifax®, Experian® and TransUnion®. Visit AnnualCreditReport.com or call 877-322-8228 to order your copies. The Federal Trade Commission (FTC) notes that this website is the only authorized site under the federally mandated free credit report program. Other websites that claim to provide free credit reports under this program are imposters.
Credit Tips and How to Raise Your Score
The Federal Reserve Board and Experian offer tips for how you can raise your credit score, including:
- Pay your bills by their due dates to avoid late payments. Late payments are not only recorded on your credit report, but they also have the potential to lower your credit score. Experian notes that how you make payments on your credit card and loan accounts is the habit that’s the “most influential” toward building a good credit rating.
- Maintain the outstanding debt on revolving credit accounts, such as credit cards and home equity lines of credit, below your maximum limit. If you continuously max out these types of accounts, your credit rating will suffer.
- Make new credit applications only occasionally. If you frequently apply for numerous credit accounts, your credit score can slip.
- Order your three free credit reports each year. You’ll be able to monitor your financial activity and identify any incorrect data, which can lower your credit score. If you see any errors, contact the source that reported the information, such as your mortgage company, bank or credit card provider. If the error is not resolved, you can open a dispute by contacting the reporting credit bureau and by filing a complaint with the CFPB by visiting ConsumerFinance.gov/complaint or by calling 855-411-2372.
- Continue to build your credit score over time. If you have a short credit history, you won’t score as high as someone with many years of diligent credit-building under her belt. But you can make the most of a short credit history by making timely bill payments and keeping outstanding debt to a minimum.
- Forbes: Which Credit Score Do Lenders Actually Use?
- Experian: What is a Good Credit Score?
- Consumer Financial Protection Bureau: What is a Subprime Mortgage?
- Federal Trade Commission: Free Credit Reports
- The Federal Reserve Board: 5 Tips for Improving Your Credit Score
- Fair Isaac Corporation. "What is a Credit Score?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Who Uses Credit Scores?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Free Score Providers." Accessed Oct. 11, 2020.
- Fair Isaac Corporation. "What's In My FICO Scores?" Accessed Oct. 11, 2020.
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.