What makes a good, or bad credit score.

As I have mentioned before, when I came out of high school I was a pro at quadratic equations and trigonometry but did not have the first clue what a credit score was. Though there is no formal effort by today's educational institutions to explain credit scores, it is one of the most vital things to have a good understanding of in the world today. It will determine your ability to buy a car or home, be approved for credit lines, or even get lower premiums on your auto insurance. I have written previously about how to get a good credit score, but let me tell you know what a good credit score is.

There are three major credit bureaus in the U.S. who compile your credit information and report a score based on that information. They are Experian, Trans Union, and Equifax. The scores they report range from as low as 300 to as high as 850. The average credit score for the U.S. consumer is around 675 or so. But what is a "good" score. Here is a quick breakdown of how most mortgage lenders will view different credit scores. This information is not from the bureaus themselves, but rather from my experience and what I see day-to-day as a broker working with the banks that are out there.

780-850: People in this range are in the "Platinum" group, as it were. The bank will be quite content to just give them a pair of keys to the vault and say "Take what you need! Just turn the light off when you're done." They will have access to any product on the market and at the very best of rates. These people have a clean, long credit history, a good mix of mortgage, installment, and revolving debt, low balances, and multiple open accounts.

720-779: People in this range are still in the upper echelons of borrowers. In fact, they will have just about the same access to products and great rates as those in the previous group, just not the same "WOW" factor. They may have a little bit "younger credit" or higher balances than the previous group. But they still have no 30 day late payments (in the past few years anyway), good history, and multiple open accounts. Most lenders will treat all borrowers the same who have a 720 score or higher. This is where is see the majority off my stronger borrowers.

680-719: People in this group still have good credit, but may have a semi-recent 30 day late payment or a credit card balance that is high. A lot of first time home buyers are also in this range due to a lack of credit history (i.e. credit accounts with less than a two year history). People in this range will have access to most of the products available, but rates will generally not be quite as great as those in the previous groups. 100% financing is still available however.

620-679: People in this group have had a few dings, though nothing quite as major as a recent (past year) bankruptcy or foreclosure. They may have some 30 or even 60 day late payments, high credit card balances, or a couple collections. However this is still not a bad group to be in when applying for a mortgage loan. Depending on your situation, you may still be able to get up to 100% financing if needed. Most types of mortgage products are still available.

500-619: People in this group have had some struggles, especially once you are below 600. This is the range people are generally in when they have a mix of multiple late mortgage payments (30 days or more), multiple collections, bankruptcy, foreclosure, high credit balances on credit cards, or even judgments and tax liens filed. This is the realm where many borrowers (not all) will need to work with a subprime lender to get financing. Rates will not be the best and may come with prepayment penalties. 100% financing may not be an option if needed, though some lenders still offer 100% if the score is 580 or higher.

300-500: Once a person's score drops to this range, mainstream mortgage lenders will not offer them credit. Hard money lenders will go down to the 300's, but those lenders will charge unholy rates and 3-5 points up front. A person will generally be better served working on repairing their credit score before applying for a mortgage.

Note - Any similarities between this breakdown and the image of heaven and hell in Dante's Inferno are purely coincidentalJ