Credit Score Scale

The credit score is a derivation of credit ratings, history, and reports. These three parameters are considered while calculating a persons credit score. Credit reporting agencies follow specific mathematical formulas in order to derive the final score. The most common mathematical model that is used to derive such scores is the FICO model. Every bank, lender, credit card company, lending institution, and financial institution follows a guide for this calculation. This score is considered by lenders while providing loans and setting interest rate.

FICO Model

  • This model includes 5 important elements while deriving the score.
  • The first element is payment history, which constitutes 35% of the number. It consists information about your past payments.
  • Timely payment has a positive effect on the entire score.
  • The second element is the amount that is owed as of date, which accounts to 30%.
  • Too may accounts that are owed result into a negative number.
  • The third aspect is the length of the credit history and contributes to 15%. A long history is a down right negation.
  • 10% of the score is made up of new amounts borrowed.
  • The last 10% is contributed by the different types of credit.
  • The FICO rating is basically a numerical between 600 and 850.
  • The credit scale, when arranged in an ascending manner, gets segregated into 6 different classes with the poorest result beginning from 600, and the best being 850.
  • This result is principally used to derive interest rates, terms and conditions of the loans, and is also used as a primary guideline in the process of approval of loan, credit card, or a debt creation facility.

Credit Score Scale

  • If you surf through different websites, you will find a considerable number of ratings, like good, bad, and poor.
  • These are the categories of scores that are used by lenders and companies to decide the approval and interest rate of a credit-related facility. The following chart will give you a brief idea about the significance of these categories.
Credit ScoreRating
760 to 849Excellent
700 to 759Great
660 to 699Good
620 to 659Fair
580 to 619Poor/Bad
500 to 579Very Poor

These categories help the reporting agencies, lenders, and credit card companies to comply with Fair Credit Reporting Act, Equal Credit Opportunity Act, Fair Credit Billing Act, and Fair Debt Collection Practices.


  • There are certain implications of these categories.
  • A very poor rating means that you have a staunch possibility of facing denial for loans and credit cards.
  • A poor rating means that you will be subject to higher levels of interest.
  • Both the above categories are deemed to be bad categories, and those who have such ratings can avail bad credit loans.
  • A fair rating has a good chance and priority in getting loans.
  • The people belonging to the good and great score can not only avail loans and credit cards quickly, but also have the advantage of lower rates of interest.
  • The best category is of course, the excellent rating, which is deemed to receive the best rates of interest and almost instant approval.

The credit score ratings scale is used for all your credit and loan related services, hence better your score, the lower is the rate of interest.