Credit Score Ranges: Guide to the Good, Bad and Ugly

Checking your credit score regularly is wise advice, but it doesn't address the question of which one. You can request a credit score from each of the three credit reporting bureaus -- Equifax, Experian and TransUnion -- and these scores are likely to be slightly different. The most commonly used credit scores are FICO and VantageScore, which range from 300 to 850, but there are many versions of these credit scores, too, in part because the algorithms used to develop them are frequently updated.

Credit scores provide a numerical snapshot to help lenders predict whether you will repay a loan or credit card debt. The higher your score, the less risky you appear to financial institutions.

"There are countless credit scores generated to predict different types of consumer behavior," says John Ulzheimer, an Atlanta-based credit expert, formerly with FICO and Equifax. "It's inaccurate to say, 'My credit score is x.' Although no one says it this way, it's more accurate to say, 'My VantageScore 3.0 score, based on my report from Experian, is x as of today.'"

Regardless of the confusion over the variety of available scores, credit scores are important because lenders rely heavily on them to make decisions that will impact your finances.

A Brief History of the Credit Score

While lenders have been evaluating people's creditworthiness for centuries, FICO first began to use data from credit reporting bureaus to predict consumer behavior in 1956. More than 30 years later, the company introduced the first FICO score in 1989.

[Read: The Best Secured Credit Cards of 2018.]

"The first FICO score saw a dramatically quick adoption and by the mid-1990s it was heavily used across different credit products," says Ethan Dornhelm, vice president of scores and predictive analytics for FICO.

One of the main advantages of the introduction of credit scores, says Ulzheimer, is that consumers could get credit decisions much faster, sometimes instantly. In addition, credit scores offer a more consistent way of interpreting credit reports that reduces personal bias, he says.

It helped lenders, too, says John Salter, an associate professor of personal financial planning at Texas Tech University in Lubbock, Texas. "It's much easier for companies to compare credit scores than to wade through 30 pages of each customer's credit history."

Over time, Dornhelm says, additional versions were developed for specific needs, such as scores for auto lenders, credit card companies and mortgage lenders. Indeed, the vast majority of all mortgage decisions rely in part on a FICO score today, since Fannie Mae, Freddie Mac and the Federal Housing Administration mandate the use of specific FICO scores for consistency, he says. Though, VantageScore is lobbying to have that guideline changed.

FICO scores have been redeveloped numerous times to keep pace with changing credit products, credit standards and data reporting practices. "We want to make sure the scores we're producing are the most predictive of credit risk. Think of it like Apple releasing the new iPhone that incorporates the latest technology," Dornhelm says.

More than 10 billion FICO scores are used annually in the U.S., and more than 100 billion have been sold throughout the world since the score was introduced, according to FICO. In addition to its industry-specific products, FICO now has a FICO 9 version.

Competition arrived for FICO in 2006, when the second major brand of credit scores, VantageScore, was launched by the three credit reporting bureaus. Today, Jeff Richardson, vice president of marketing and communications for VantageScore Solutions, says more than 8.5 billion VantageScore credit scores are used each year. It's been updated four times, including a change to align with FICO's score range to reduce lender and consumer confusion.

Monitoring Your Credit Score

Despite the variety of available scores, credit experts recommend monitoring your credit reports and your credit score at least annually, if not monthly.

"The value of checking your credit scores periodically is that even if the scores are different, they are directionally similar, so you can be prepared before you apply for credit," says Ulzheimer. "All credit scores are based on information in your credit report. They just weight factors in different ways."

When you check your credit report and request your credit score from each of the three credit reporting bureaus, you're likely to see a difference in your score ranging from a few points to 20 points, says Salter.

"Part of the difference is that not every creditor reports your on-time payments or your late payments to all three credit bureaus," says Salter. "That's why you need to check all three reports for errors and negative information. Watch out if you see a big drop in your credit score because that signals there's something to address. That's much more important than a minor discrepancy in points from one score to another."

You can request a free annual credit report from each of the three credit reporting bureaus at AnnualCreditReport.com. Your credit report won't include your credit score, so you may need to pay a small fee to obtain it directly from each credit bureau. When you obtain your credit score, you'll also see reason codes that explain why your score is what it is from the model that generated your score and what actions you can take to make it higher. To help consumers understand those codes, VantageScore created the ReasonCode.org site.

You can also receive credit scores, some of them for free, from credit monitoring sites, though they may not be the same as the score a lender will see. A lender could be using a different version of the same scoring system, a different type of credit score altogether or a newly adjusted score, rather than the exact score you see on a credit monitoring site. In recent years, FICO partnered with credit card companies to provide consumers with their credit score for free.

[Read: The Best Starter Cards for Building Your Credit.]

"More than 250 million consumer accounts offer free access to credit scores," says Dornhelm. "We allow companies that are pulling their customers' credit scores for risk management to share those scores to their online customers."

You can also pay for your FICO score at MyFICO.com.

The Difference Between FICO and VantageScore

While both FICO and VantageScore are based on credit reports, the main differences between the two are the scoring criteria and the weight given to different consumer behaviors.

"There are 28 million consumers without a FICO score because their data is too thin or too stale," says Joanne Gaskin, senior director for scores and analytics at FICO. "Our scoring criteria is that you need to have at least one trade line, meaning an installment loan or credit card, for at least six months so we can see your credit behavior. You also need to have fresh information in your credit file, something that has been updated within the last six months. We think if we lower these standards, then the scores will be less reliable."

VantageScore can generate credit scores for consumers after one month of credit activity, which is as soon as the account appears on the credit report. Richardson says, "Our scores are primarily based on a 24-month review of a consumer's credit file, which means infrequent credit users with dormant credit accounts can also have a credit score."

Another difference between FICO and VantageScore is that FICO has industry-specific score models, while your VantageScore credit score applies to all categories of lending.

Keep in mind that the credit scores you request from a free or paid site could be an educational score, one that's rarely or never used by lenders; a VantageScore; or a FICO score, and could be different from the score a lender sees, depending on which credit score model the lender uses. A 2012 study by the Consumer Financial Protection Bureau found that while the majority of the time the score a consumer sees would be in the same credit category as the lender's credit score, 19 to 24 percent of the time the score disparity would place the consumer in a different credit category by one category. One to 3 percent of the time, the disparity would mean a difference of two or more categories.

Despite the nuances of the different models, Ulzheimer says, "People with good credit will have good credit regardless of the brand of their credit score."

What Impacts Your Credit Score and What Doesn't

Both FICO and VantageScore rely on the information in your credit report to generate a score. "Your income isn't included because it's not in your credit report," says Dornhelm. "In addition, your age, where you live and anything in a protected class such as your gender and ethnic background does not impact your credit score."

For FICO, the key areas that impact your score include:

-- Payment history (35 percent): This looks at your on-time, late or missed payments.

-- Amount owed (30 percent): This compares your balances with your available credit.

-- Length of credit history (15 percent): The longer you have managed credit, the lower of a risk you are to lenders.

-- Credit mix (10 percent): A mix of credit types such as an installment loan and revolving credit (a credit card) is best.

-- New credit (10 percent): Too many inquiries or opening several new accounts can hurt your score.

[Read: The Best Credit Cards for People with Fair Credit.]

For VantageScore, the key areas that impact your score include:

-- Payment history (extremely influential): 90 percent of consumers rated as prime pay all bills on time.

-- Age and type of credit (highly influential): A mix of accounts, including older accounts, is best.

-- Percent of credit limit used (highly influential): Keeping balances under 30 percent of the limit will help your credit score.

-- Total balances and debt (moderately influential): Reducing your overall debt can improve your score.

-- Recent credit behavior (less influential): Opening several new accounts can reduce your score.

-- Available credit (less influential): Opening only credit accounts you need can keep your credit score strong.

Reading your credit report and reviewing any negative comments can help you identify ways you can improve your credit score.

Score Ranges for FICO and VantageScore

Credit decisions are made based on numerous factors, not just your credit score, but consumers naturally want to know where they stand in the eyes of lenders and in comparison to other consumers. According to FICO, here are the base score ranges:

-- Exceptional: 800 and above

-- Very Good: 740-799

-- Good: 670-739

-- Fair: 580-669

-- Poor: 579 and lower

By comparison, here are the tiers for the two most recent iterations of VantageScore:

-- Superprime: 781-850

-- Prime: 661-780

-- Near prime: 601-660

-- Subprime: 300-600

Nationally, the average FICO score is 700, while the average VantageScore is 675.

"An average FICO score of 700 will typically qualify you for most credit at favorable terms," says Dornhelm. "If you have a score of 800 or above, you're among the top 20 percent of people in the U.S. in terms of your credit score. People with FICO scores in the 500s and below have relatively poor credit and have more trouble qualifying for credit."

Meanwhile, according to VantageScore, a score designated as prime generally means you can be approved for new credit.

But in the end, Richardson says it's the lender who decides what's good or poor credit. "Directionally, anything above 620 is generally good and under 600 is generally poor, but that's no guarantee of any credit decision either way. That's why it's so important for consumers to shop around."

Ulzheimer says the definition of good credit varies by industry, too. "For mortgages, a credit score of 760 and above is usually what you need to get the best deal. For auto loans, you can usually get the best deal with a score of 720 or above."

Those credit score guidelines change over time. For example, in 2009, a credit score of 680 or above was typically needed to get the best mortgage rates. Today, Ulzheimer says, a credit score of 650 or below will generate significantly higher mortgage rates on conventional loans.

Credit card companies don't always follow similar guidelines, says Ulzheimer, so it's more difficult to predict the credit score required for the best credit card rate.

Salter says, "The most important thing about your credit score is that you need to be proactive in protecting it. It's so easy to ruin your credit and so hard to get it back."

Michele Lerner, an award-winning journalist, author and editor, has been covering personal finance and real estate for more than two decades. Her work appears in U.S. News & World Report, The Washington Post, NewHomeSource, Bankrate and Credit Karma as well as numerous other publications. Follow her on Twitter @mvlerner.