One of the reasons that lenders and insurance companies use credit scores is because they make it very easy to rank their customers and applicants. Think how easy it is. Let’s say that 100 of you walk into my bank and fill out auto loan applications. I’ll pull credit reports and scores on every single one of you and then stack your applications from the highest score all the way down to the lowest score.
What I’ve just done is to rank order all of the applications against each other. I can approve everyone with a 600 or higher credit score and deny everyone with a 599 or below. It’s very simple. Or, I can approve the top scoring 50% regardless of the score. I’ll just grab the top half of the applications and throw out the bottom half. Viola!!
So have you ever wondered where YOU stack up? We’re American’s right? We have big egos and we want to know how we rank compared to everyone else. Fair enough. Here’s some information that you might find interesting…and maybe frustrating. Don’t know what your credit score is right now? Not to worry, you can get your free credit score right now with no credit card required!
700 Credit Score – Pretty good score, right? Where do you think a 700 ranks your nationally? You might be surprised to know that a 700 puts you right smack dab in the middle. That’s right, a 700 will get you to the 50th credit score percentile. That means that half of the country scores higher than you and half scores lower than you. Shocking isn’t it?
I think this surprises people because we’re not use to being graded by FICO’s 300-850 scale. We’re all so use to the A-F system of grading. The difference is that a 700, while it’s only an average credit score is a pretty good score if you’re applying for a loan. So what’s the conclusion? Simple…most people in this country have good credit and good credit scores.
620 Credit Score – Pretty bad score, huh? A 620 will put you in the 25th credit score percentile. That means that 75% of the folks in the country have a higher credit score rating than you. Not good. But wait. Don’t despair. You can easily get a mortgage or a car loan with a 620 credit score. In fact it’ll be easier for you to get a $200,000 mortgage than it will be for you to get a $2,000 unsecured credit card. Seriously. Here’s why…
The bank can easily take things like cars and houses back if you don’t make your payments. They are called "collateral" or "security." As such, lenders can go deeper into the credit scoring pool when they lend money on these items. But, it’s kind of hard to repossess dinner or a great vacation charged on a credit card. That’s why it’s easier to get a house with bad credit than it is to get an unsecured credit card.
755 Credit Score– Hey, now we’re talking!! I must have the crème de la crème of credit scores. Cool your jets. You’re not that great. A 755 will get you into the 75th percentile. A full 25% of your neighbors have higher scores than you. In fact, if you earned 75% of the points in your school classes then I believe you’d be getting straight C’s.
The good news is that pretty much any lender is going to think you are golden with a score of 755. You’ll get whatever you want at the best interest rates available. Enjoy your excellent score but don’t have an attitude about it!
Anything less than 500 or above 800 – Only about 1.5% of the people in this country have credit scores less than 500. It’s pretty hard to get a score that low. You really have to try and NOT pay your bills on time and that still may not be enough.
And only about 6% of us have scores greater than 800. That’s because most American’s have a ton of credit card debt and you’re not going to get into the "800 Club" with a lot of credit card debt no matter how well you pay your bills.
This means that about 92.5% of us will have a credit score ranking between 500 and 800.
Where does your credit score rank? Now you know. Share your feedback or questions in the comments section below and, if you haven’t done so already, go get your free Credit Report Card now!