What Are the Different Credit Score Ranges?

Your credit score significantly impacts almost every part of your financial existence, from securing loans and credit cards to renting an apartment. Understanding credit score ranges will help you identify all the possible ways to build better credit for better future financial planning. 

In this article, we will provide an overview of credit scores, showing you the different credit score ranges, what they mean for your financial opportunities, and how to boost your credit rating.

What is a Credit Score?

A credit score is a number that reflects your trustworthiness as a borrower, using information about how you paid back debts in the past. It is based on information from your credit reports, which consist of payment history, amounts owed, length of credit history, new credit, and types of credit accounts. When you factor in all these components, your credit score, with specific credit score ranges, results.

Credit Score Ranges Explained

General Ranges in the UK

In the UK, credit scores usually come in the following bands:

• Best (961-999): Likely to get offered the top rates from lenders.
• Very Good (881-960): Very dependable.
• Good (721-880): This means that you have a stable credit history and an ideal credit score.
• Fair (561-720): This is a category for average people who have had some credit issues in the past but are still highly likely to be accepted by the vast majority of lenders.
• Very Bad (0-560): This indicates a complete inability to repay, with serious problems even getting credit.

Credit Score Ranges and What They Mean

1. Excellent Credit Scores

Good credit offers great advantages, such as the lowest loan and credit card interest rates and terms. Because borrowers in this range are low-risk borrowers and have easy credit to obtain from lenders. In other words, those top brackets are the numbers telling potential lenders that they can trust you to pay them back, which ultimately means you get the best mortgage rates and lower insurance premiums.

2. Very Good Credit Scores

Those with very good credit scores will also receive favourable conditions on loans and credit cards. Although a very good score may not be as beneficial as an excellent score, it is a good indication of credit reliability. Individuals in this range are usually consistent at paying and boast low credit utilisation ratios, which makes them ever-attractive to creditors.

3. Good Credit Scores

A good credit score also allows you to receive loans in the future at decent interest rates and terms. It's not the best, but it says you have a responsible history of credit. This is a good starting point for getting better at it. Falling within the good credit score range indicates you will likely be approved for most credit products, although at rates generally not as good as those available to consumers who fall in the excellent credit score range.

4. Fair Credit Scores

Fair credit scores can lead to higher interest rates and less favourable terms. Borrowers with credit in this range are considered to be subprime or "non-prime," and they perceive this range as "fair." It is entirely possible to borrow a loan or credit facility. Improvement of your score results in so many opportunities. Still, scores at the opposite end of the spectrum (with the possible exception of the low fair) are unlikely to get credit at all…and if they do, the interest and fees will be higher than they would for someone with good credit.

5. Poor Credit Scores

Having a low credit rating makes it hard to get approved for loans or credit cards. This is considered a high-risk area by lenders. If you are serious about home buying, you must take action to increase that score and deal with your credit problems. If you fall into the category of poor credit score ranges, you are usually on the outside of more credit and have to do some work to rebuild your credit completely.

Steps to Repairing Credit

Credit Building Tips

As you can imagine, increasing your credit score is all about steady and responsible financial behaviour. Here are some tips:

1. On-Time Payments: Always pay your bills on time; this will help build a positive payment history.
2. Debt Reduction: Make a serious plan to eliminate your outstanding debt, most of all your high-interest debt.
3. Credit Utilisation: Make sure to have your credit card balance low (compared to your credit limits).
4. Your Mix of Credit: It can affect 10% — It's good to have a mix of credit types.
5. Understand New Credit: Do not apply for credit unless you have steadily paid your bills on time.

The better you understand your ranking in the credit score ranges, the more opportunities you can unlock to achieve your financial goals.

Monitoring Your Credit Score

When you check your credit report routinely, you can keep track of your credit health. Credit monitoring services monitor bank accounts and student bank accounts for changes and discrepancies that may indicate errors or fraudulent activity. Handling matters as quickly as possible can prevent detrimental effects on your credit score ranges. The three major credit bureaus, Experian, Equifax, and TransUnion, provide credit report and scoring services.

How Financial Products Are Influenced by Credit Score Ranges

1. Mortgages

When it comes to qualifying for a mortgage, your credit score plays a huge role. The best mortgage rates go to borrowers with credit scores in the mid-700s or higher. On the flip side, if you fall within the fair or poor credit score levels, you may experience higher interest rates or even have trouble securing a loan at all.

2. Credit Cards

Credit card companies use your credit score to determine your eligibility and the terms of your credit card. Credit scores in the excellent and very good credit score ranges can lead to higher credit limits and lower interest rates. Conversely, people with lower scores may be offered a lower limit or higher rate, as well as a secured or subprime credit card. It goes the same for student credit cards as well!

3. Loans and Overdrafts

This is also the case with personal loans or student loans and overdrafts, defining the level of the credit score. A better rating allows you to qualify for a loan with a fair rate and better terms. On the other hand, if you have a fair or poor credit score, then you may just get higher interest rates or less favourable loan terms. For a better understanding of how student loans affect your credit score, click here!

4. Insurance Premiums

Insurance premiums are also influenced by your credit score. Credit score ranges: Insurance companies frequently assign a range for credit scores in establishing rates. The lower the score of your credit rating, the greater the impact on the price you'll pay for insurance.

How to Keep a High Credit Score

To keep your credit score as high as possible, it is an ongoing effort to manage your money responsibly. Certain steps that you can take to maintain good credit score ranges are:

1. Regular Credit Check: Check Your Credit Score and Reports on a Regular Basis
2. Responsible Credit Use: Use credit wisely by maintaining low balances that you can pay off promptly.
3. Avoiding New Debt: If you are adding new debt, watch out for new costs that might cause your monthly budget to become overstretched.
4. Keep Your Credit Report Clean: If you see errors on your credit report, dispute them and get them resolved.

You must understand the various credit score ranges and how they impact your financial health so that you can keep a check and increase your scores. A better credit score will give you more financial freedom and save you money in the long run.