The companies that develop credit scores – FICO and VantageScore, for example – do not decide which credit scores are “good” or “bad.” Nor do the credit reporting agencies that supply the credit reports that are used to create credit scores. Instead, it’s up to individual lenders and insurance companies who use these scores to decide which scores demonstrate an acceptable level of risk.
They use them in a variety of ways, too:
- Determine the interest rate they will charge for a loan, or in the case of an insurance company, the discount they may offer on an insurance policy.
- Decide whether to extend credit, how much credit to approve, whether to increase (or lower) a customer’s credit limit, or even to close a risky account.
In a way, then, there is no such thing as a “bad credit score,” since the number itself doesn’t mean anything until a lender decides how to use it.
In other words, a credit score is only bad when it keeps you from whatever you are trying to accomplish, whether that is to refinance a loan, borrow at a low interest rate, or get the best deal on your auto insurance.
But in the real world, there are some assumptions that can be made about credit scores that fall into different ranges. When you are reviewing a credit score where the range runs from 300 – 850, you can generally assume the following:
- Excellent Credit: 750+
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
- Bad Credit: below 600