What is a good credit score in 2019? You’ve checked your credit score, but what do those three numbers mean? And do the rules to calculate them change each year? You may even have an idea of what is a good credit score. What you may not realize is how lenders use credit scores to determine if you qualify for a loan or credit card and at what interest rate.
A Little History
In the 1950s, Bill Fair and Earl Isaac developed an automated scoring system that eventually grew into the FICO score. The Fair Isaac Corporation (FICO) sold the credit scoring system to banks and retailers around the world. In 2006, the three credit bureaus — Experian, TransUnion, and Equifax – formed VantageScore Solutions, which developed a credit scoring system using a different set of criteria. Your credit score in 2019 may be calculated using a FICO or a Vantage method.
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Understanding Credit Scores in 2019
In addition to the two principal credit scores, specific lenders such as credit card and auto loan lenders use specialized scoring systems for their particular industry. The scoring methods may be different, but their credit scores share some common traits. All scoring systems break the individual scores into groups. These ranges are based on the individual’s ability to repay a debt based on payment history. The following breakdown is a guide to what the different ranges mean, regardless of which scoring method is used.
Poor: 300 to Mid-600s
The closer you are to the mid-600s, the better chance you have of securing a loan, but it won’t be on the best terms or lowest interest rate. If your credit score is closer to 300, you might not be able to get approved for a loan or unsecured credit card at all.
Fair to Good: the Mid-600s to Mid-700s.
Once you hit the mid-600s you may get approved for a financial product, but you will probably not get the best terms. If your score is closer to the mid-700s, you may be able to shop around for better options, but you still may not get the best terms.
Very Good and Excellent: Above the Mid-700s.
Borrowers with scores in this range are likely to get the best interest rates and have more options in terms of loan repayment. Having a score at or above the mid-700s doesn’t guarantee you will get the financial product. Lenders look at other factors such as debt-to-income ratios when deciding whether or not to lend money.
Using Credit Scores
Lenders use credit scores to help them determine the amount of risk associated with lending money to a specific individual. However, credit scores are not the only criterion that a lender uses. They may look at the amount of your overall debt and your sources of income to make sure you have (or are likely to earn) enough money to repay your debt. Lenders will often create credit ranges to conform with their lending policies. As a result, what is a good credit score at one lender may only be fair score at another.
Despite the variation in credit score ranges, it is still important to know your credit score. Knowing your credit score can help determine which financial products you could be eligible for and what the terms could be. Unfortunately, some lenders have very strict criteria, and anyone who doesn’t meet the exact credit score will be denied. In those cases, a slight difference in your credit score could see your application automatically rejected. Make sure you understand what your credit score in 2019 is, as a good one will give you access to better interest rates.
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Monitoring Credit Scores
Depending on how frequently you check your credit score, you may notice slight variations from day-to-day. These fluctuations are common. Every time a request is made to one of the three large credit reporting companies, your credit score is generated. That means, your credit score is not generated at the beginning of each day and never changes throughout the day. In fact, your credit score is never stored, so it is impossible to view a history unless you track your score.
To effectively monitor your score, pick one scoring method, and stay with it. If you start with FICO, don’t switch to Vantage. Since each scoring method uses slightly different criteria, any progress you see may be the result of the method used and not from an actual improvement in your credit score.
What Is A Good Credit Score In 2019?
The average credit score in 2019 by FICO in America is 695, meanwhile the average credit score in 2019 by Vantage score stands at 673. The difference in the two scores is 22 points, which may not change your credit rating unless you are at the top or bottom of a range. That is why it is advisable to use one method for monitoring your credit score. If you don’t, you will find it difficult to determine whether your credit is improving or declining.