FICO is the most widely used credit scoring system in the United States. The name is an acronym for Fair, Isaacs, & Co., the firm that produces the scoring system. FICO scores range from 300 to an ideal score of 850. Your FICO score is based on your payment history, total debt, the length of your credit history, new credit or borrowing, plus some additional factors, according to the Consumer Federation of America.
High Scores
According to Credit Scoring, the average FICO score is in the neighborhood of 725. Any FICO score above 700 is considered a good score by lenders. It indicates low credit risk and good financial health. You can expect lenders to extend you credit and offer good interest rates. However, the higher your FICO score, the better. A FICO score in the high 700s or above will help you get the best interest rates, saving you money.
Mid-Range
A FICO credit score ranging from 620 to 690 is viewed as moderately good. Potential lenders will look closely at your credit history. At this level, you are perceived as presenting some credit risk. However, most lenders will extend credit in the form of credit cards, mortgages, and car loans. Lenders may charge higher interest rates to compensate for lending money to higher-risk borrowers.
Poor FICO Scores
In general, a FICO score of less than 620 is considered subprime. Poor FICO scores indicate serious credit risk. Some institutions, like mortgage lenders Fannie Mae and Freddie Mac, do not normally extend credit to subprime borrowers. This does not mean you cannot get credit. However, lenders who do extend credit to subprime borrowers charge significantly higher interest rates. For mortgages, the Federal Housing Authority and the Department of Veterans Affairs are exceptions. They accept FICO scores under 620, provided other requirements are met. In general, a record of responsible use of credit for the previous two years is required to qualify for FHA/VA loan guarantees.
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