What do different credit scores mean?

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What do different credit scores mean?


Credit scores range from poor to exceptional, and what those three-digit numbers are can determine what your interest rate will be when taking out a loan. It can also make the difference between being approved or declined for a credit card, car loan, or mortgage, or even whether you get the job at some companies. The average score in the U.S. as of October 2020, according to Experian data, was 711, while Transunion reports that Canadians average 650 using a similar credit scoring model, although the upper range is higher.

A credit score is calculated based on five variables, the length of your credit history, the amount of debt you have, your payment history, a mix of credit, and new credit. The number represents the amount of risk the lender is taking when you borrow money at a particular moment in time based on the information that’s in your credit report. There are three major credit reporting agencies, TransUnion, Experian and Equifax. Each one calculates your score differently, but all focus on how responsible you are with the money that you borrow. While your scores may vary somewhat, all are based on information provided by these agencies and can range anywhere from 300 to 850 in the U.S., as high as 900 in Canada.

To interpret your credit score and how much borrowing power you have, you need to understand where it falls along the score range between the lowest and highest numbers in the system. Assuming all other factors are equal, a higher credit score usually means paying lower interest rates and lower deposits, such as opening an account with a utility company or securing an apartment. Over the lifetime of a loan, even what seems to be a minimal reduction in the interest rate can add up to thousands of dollars over time.


To understand just where you’re at, here’s what you can expect depending on your particular credit score.

Less than 580

If your score is less than 580, it’s considered to be a poor credit score. It’s usually the result of defaulting on multiple credit cards and/or loans, having unpaid bills sent to collection agencies, or due to a bankruptcy, which remains on your credit record for seven years if Chapter 13 was filed or 10 years for Chapter 11.

Borrowers who have poor credit scores have little chance of obtaining a loan or any new credit; however, there are loans for bad credit that will sometimes approve borrowers with scores this low. The catch is that the interest rate is likely to be quite high.

580 to 669

If your score falls anywhere from 580 to 669, it’s considered a “fair” score. You can be disqualified by some lenders when applying for a mainstream loan, as you may be considered a subprime borrower, only eligible for a loan with a significantly higher interest rate.

670 to 739

Your credit score is rated good if it ranges between 670 and 739. Lenders consider consumers who have a “good” score to be acceptable, which means you’re likely to qualify for many credit cards and loans, but you won’t get the best interest rates.

740 to 799

A score of 740 to 799 is considered a “very good” score which means you’re likely to qualify for a better interest rate from a lender, assuming you meet their other criteria, such as making a certain income.


Those who have credit scores of 800 or higher have what’s considered to be an “exceptional” score. If you apply for new credit, the approval process is likely to be easy, and you’ll probably get the best lending terms that are available, including the lowest interest rates.


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