Posted on July - 28 - 2010
Excellent Credit Score
The economy is driven by consumers and their buying power is enhanced through lines of credit available to them. Banks and other financial institutions whose business is to offer lines of credit and loans, need an effective system to evaluate the creditworthiness of loan applicants. For this purpose, credit scores were introduced. An excellent credit score almost guarantees that you will be favorably considered for a loan by any financial institution. The question that often keeps popping up all the time is, ‘What is an excellent credit score?’. In this article I’ll provide an estimate of what constitutes an excellent credit score rating.
About Credit Scores
In most countries, including the USA, the system used to make an objective evaluation of creditworthiness and debt repaying ability of a loan applicant, is the usage of a credit score system. In the United States of America, the most widely used system is FICO credit score system. It is a fiscal health measurement parameter. If you have a look at the FICO (Fair Isaac) credit score ratings chart, you will know that this scale extends from 300 to 850. It is calculated using a statistics based algorithm developed by Fair Isaac Corporation. It was designed to make an unbiased evaluation of a loan applicant’s debt repayment ability. The credit bureaus uses past credit reports of an individual to calculate credit scores using the FICO developed software program.
A higher score means more chances of getting low interest rate loans. Before we talk about what qualifies as an excellent credit score (2010), let me list the variables that decide the outcome of credit score ratings calculation.
Factors That Decide Credit Score
Credit scores measure your past fiscal karma to decide your credit score! The variables that are the most important in deciding credit score are payment history, size of total debt, new credit and length of credit history. Bankruptcy and defaulted credit card payments are some of the factors that lower your credit score drastically.
Excellent Credit Score Range
What makes for an excellent credit score? The question can perhaps win a poll of most asked question in financial matters. ‘Excellent’ is an adjective that does not signify exactness. It is a relative quantity. Still an excellent credit score for mortgage loans, of low interest rate, is anything above 760. So the range of credit scores above 760 up till the highest value of 850 (which is statically unattainable), can be considered to be excellent credit score range. Past credit score surveys reveal that median credit score rating is about 723. Some credit managers classify a score above 770 to be an excellent credit score.
When a loan applicant comes up with an excellent credit score, ranging anywhere above 760 or 770, the lender certainly sees him in positive light as it is a proof of excellent debt repayment history. Being in this high credit score range means that bankers will consider offering you a loan at lower interest rates. It is highly likely, that for personal loans, people with excellent credit score ratings won’t be asked for collateral or any other kind of security. You can expect royal treatment!
After knowing the excellent credit score range, if you find that your credit score is below that range, then you need not be disappointed. Credit score is not the one and only deciding factor. Your current financial position is also evaluated before coming to a decision. Know about the various ways to improve credit score and follow them to increase your chances of landing up with low interest loans. All that you need to do is be consistent in your bill payments and manage your expenses wisely.
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