What Is A Good Credit Score?

• A credit score is usually only one factor among several in a given lending decision. It’s usually an important factor, but a lender may also weigh other criteria heavily as well.

• Every lender sets their own criteria based on how much risk they’re willing to assume and how much profit they think they can make, but, generally speaking, the higher the score the better.

• Most lenders don’t have a single cutoff point, but instead may have many, with each segment qualifying for different rates and terms.

• The most common credit scoring system, FICO (from Fair Isaac & Co.), rates borrowers on a numeric system from 300 points to 850 - the higher the better.

• Most American borrowers score 700 or higher on the FICO scale. Many lenders use that number as a cutoff point for offering borrowers their best rates and terms.

• Companies that lend to borrowers below that level are often called “subprime” lenders because their risky borrowers are considered less than “prime.”

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• Fair Isaac & Co. has recently created an updated credit scoring system that they call “NextGen.” It has a wider range than FICO: 150-950. Your actual score, however, predicts about the same amount of risk in both systems. So, a 750 is considered low-risk under both FICO and NextGen.

Disclaimer: This article is provided for information use only. It does not take the place of an attorney, a tax advisor, or an accountant. Always seek out the advice of a licensed professional before undertaking any significant change in your financial situation.

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