Ok, I’ll admit, my audience IS pretty finance savvy, but, as my wife reminds me, I’m no Rockefeller. I mean, my last post was about golf. Hardly highbrow stuff.
But anyway, this brings me to this post’s topic – a very basic credit score explanation. This is because I talk about credit, finance rates, equipment financing, Section 179 (again and again)…. But I always mention “good credit scores” as if everyone knows what number is actually “good”. And I realize a lot of people really don’t know that. So here’s a quick and dirty primer on the basics as to what a “good” credit score is:
First of all, your credit score is the score the four major credit reporting agencies give you. It’s a numerical score based on all of your credit activity. The four reporting agencies are: Experian (formerly TRW), Equifax, TransUnion, and Innovis. Yea, that last one isn’t as well known, but they’re part of the equation. They each give you a score that ranges from about 300 – 850. The higher the number, the better (to make it simple, you can say your single credit score is an average of the four).
Anyway, here is what the numbers generally mean:
760 – 850 = excellent
700 – 759 = great
660 – 699 = good
620 – 659 = fair
580 – 619 = poor
580 and below = ummm… bad.
These numbers are taken from my industry – in other words, it’s what we use (as an average). Here are the “official” numbers from FICO (Fair Issac Scoring)
760-850 = Great
725-759 = Very Good
660-724 = Good
560-659 = Not so Good
300-559 = Bad
As you can see, my industry is a bit more lenient overall. Someone with 700 is “great” in an equipment financing company’s eyes, but only “good” in FICO’s eyes. “Great” trumps “good”.
So why is this? Well, I think it’s because my industry usually puts a “face” to the score. Plus, we deal with businesses, where we understand that sometimes, things don’t always go as planned. So many different things affect credit scores that we are probably willing to overlook a little negative.
I hope this was helpful in showing you what the raw “credit score” number means in terms of where you stand. I’m going to talk about credit scores more in the months to come, and we’ll get into what affects credit scores, the credit reporting bureaus, and more. Stay tuned.