The FICO credit score range is a summary of how you handled your credit over the last seven years. Over time companies have used statistics to estimate how people will handle their credit under different credit score ranges to determine what interest rates they would have to charge to make the loan worth the risk.
What is A Good Credit Score?
Well the perfect credit score range is 760 to 850. You won’t see many differences in offers anywhere in that range, but you’ll love every offer you see. To achieve this range you must never (in the last 7 years) ever miss a payment, use credit but pay it in full every month, and have been doing that consistently. Essentially you’re screaming to creditors “I love credit and will play your game exactly how you want me to.”
For the rest of us a good credit score range is anything north of 650. You see a significant drop in interest rates at this point.
Why the Huge Swings in Interest Rates?
The interest rates are the primary tool in battling delinquency rates. The more likely someone is to default on their loan the more you have to charge everyone similar to them to still earn your profit while writing off the bad debt. Here are the primary credit score ranges and their estimated current 30 year mortgage rates. (If you have a low credit score, you might consider taking some credit restoration steps to clean things up before applying.)
- Less than 500 (89% delinquent): Not Available
- 500 to 549 (70% delinquent): Not Available
- 550 to 599 (51% delinquent): Not Available
- 600 to 649 (31% delinquent): 6.23% maybe
- 650 to 699 (14% delinquent): 5.5%
- 700 to 749 (5% delinquent): 4.9%
- 750 to 799 (2% delinquent): 4.6%
- 800+ (1% delinquent): 4.6%
The same credit score ranges on a car loan are even more frightening. The people who need the help getting a car loan the worse (because they really need to keep their job) are the same people getting gouged for the loan. Here are credit score ranges for a 48 month car loan and their corresponding interest rates.
- Less than 500: Not Available
- 500 to 549: 21%
- 550 to 599: 20%
- 600 to 649: 15%
- 650 to 699: 10%
- 700 to 749: 8%
- 750 to 799: 6%
- 800+ : 6%
Before getting a loan check out which credit score range you are in and see if there is anything you can do before getting the loan to push you into the next bracket.
