Once Upon a Credit Score

You can’t improve your credit score until you truly understand what the different credit-score ranges signify. Turns out, the little pigs (yes, those pigs) can help you figure that out.

Join SAFE Cents host Mark, as he and those delightful bacon boys teach you a thing or two about understanding your credit score. Who knows? The big bad wolf may make an appearance, too.

What Your Credit Score Means: a Video Summary

Today’s episode is all about your credit score, which predicts how likely you’ll pay back money that you’ve borrowed.

See, in the old days when you didn’t pay it back, the lender would send you a friendly reminder, like the one attached to that baseball bat. 

But then we all got civilized, and in 1989, the credit score was born.

Your credit score can range from 300 to 850. The higher your score, the easier it may be to borrow money. But what does that really mean? 

Let’s use the story of the three little pigs to help you understand it. Imagine that your credit score is one of the houses the pigs built. 

If your score is 800 or higher, then your house is made of bricks. You’re a solid, exceptional borrower. 

A score of 740 to 799 is almost as good. It’s mostly bricks — and a couple of sticks. Still very dependable, and lenders like you a lot. 

670 to 739 is not as great as the top two. That’s the house made of sticks. Most lenders still consider this a good score. 

And then things get less stable. A credit score between 580 and 669, that’s the little-pig equivalent of a house made of only straw. Some lenders will approve loans with scores in this range, but you’ll likely face higher interest rates. 

Any score less than 579 means the big bad wolf already blew your house down, and he may not lend you any money to rebuild it.

For more ways to keep your money safe and healthy, visit our Learning Center.

Getting a Good Credit Score

You’ve checked your credit score recently using SAFE’s free access to your FICO® Score. But do you know what that score means? Do you know if it’s good or bad? Understanding your credit score (and its impact on how lenders determine your creditworthiness) is an important first step to improving it.

Good Credit Score Ranges

A FICO® credit score generally ranges from 300 to 850. The higher your score, the more likely lenders are to work with you. The more lenders want to work with you, the better your rates and perks, and the more varied your options.

That's pretty straightforward, but may be hard to understand when you’re looking at your own credit score. So, what’s a good credit score? Generally speaking, 670-850 is a good credit score range, while anything below 670 is less ideal.

• 800-850: Exceptionally good credit scores start at 800. If your credit score is 800-850, you’re going to qualify for almost any loan for which you apply.
• 740-799: A great score would generally be 740-799. People with a credit score in this range are considered very dependable and reliable, and few lenders have qualms lending to these individuals.
• 670-739: A good credit score is 670-739. Most lenders will still work with people in this range, though some unconventional or unsecured loans may be out of reach for someone with a score in this range.
• 580-669: A credit score of 580-669 could still qualify you for loans, but you’re more likely to face higher interest rates.
• 350-579: Individuals with credit scores below 579 are unlikely to qualify for a loan without a co-signer.

How do I improve my credit score?

If you’re on the lower end of the credit spectrum and trying to make sure you have the most favorable rates, there's good news! Almost everyone can improve their credit score by at least a few points with a few simple tactics. So, how do we do this? We’ve talked about what makes up a credit score and how to improve it at length before, but here we’ll start small.

First, let’s talk about how credit scores are calculated. There are five factors that go into coming up with your credit score, but they’re not all weighted equally.

• Payment History – 35%
• Debt – 30%
• Credit History – 15%
• New Credit Requests – 10%
• Credit Mix – 10%

Fair Warning! If your credit score is in the 350-669 range, rebuilding your credit is likely going to take time and hard work. There’s no magic wand you can wave, no big bad wolf you can beg to recover your credit. But there’s an old adage: The best time to plant a tree was 20 years ago. The second-best time is today. Starting your credit recovery journey may be a daunting task, but now’s the time to do it.

So, let’s get into it.

Payment History can only be improved over time. After 7 years, late payments will drop off your report, so focus on making on-time payments starting now.

Debt is more accurately called your “debt ratio.” Two people may each have $10,000 in debt, but a person with a $10,000 credit limit is using 100% of their available credit, while a person with a credit limit of $50,000 is only using 20% of their available credit and is seen as a more desirable borrower. That doesn’t mean you should go open loans or credit cards just to increase the available credit! But it does mean you should focus on paying down your debt, ideally paying more than your minimum payment. It also means that you shouldn’t necessarily close credit cards you’ve paid off. Like SAFE’s credit card offerings, if the lender doesn't have an annual fee, it may be worth leaving your credit card open to increase your available credit. Just make sure you use it occasionally (and pay it off in full!) so the issuer doesn’t cancel the card due to non-use.

Credit History looks at how long you’ve been borrowing money and your average account age. This is another one that can only improve with time, but it’s also another reason not to necessarily close paid-off credit cards – especially if you’ve had them for a while. 

New Credit Requests look at how often and how recently you’ve opened lines of credit. A lot of credit inquiries from lenders could be a red flag. We recommend you check them monthly regardless of whether your credit is good or bad. It can help keep you on track if you’re trying to rebuild credit or can help flag errors on your accounts quickly.

Credit Mix looks at the types of credit you have. Credit cards are revolving; mortgages, auto loans, and personal loans are installment. Lenders want to see a mix so if, for instance, you have a lot of credit cards open, think carefully before opening another.

It's not necessarily easy, but rebuilding your credit is worth it to ensure that you can get good loans from reputable lenders.