• Basic Credit Score Range + Some Important FICO Numbers

    Brandon Cornett

    By Brandon Cornett
    © 2011 All rights reserved

    Author's Note: We get a lot of questions from readers about credit scores. It's a hot topic among first-time home buyers in particular. Everyone wants to know what kind of FICO score they'll need to qualify for a loan. To best understand this subject, we must start with the FICO credit score range, and how it relates to you as a borrower.

    When you hear people refer to their "credit scores," they are usually talking about their FICO score. There are different scoring models out there, and they all have a different range associated with them. But the FICO model is the one used by most mortgage lenders (as of right now, anyway). So it's the one you should care about the most, as a borrower.

    The FICO credit score range goes from 300 to 850. A higher number is better. A higher number will help you get approved for a loan, and even secure a lower interest rate. By securing a lower rate, you could save thousands of dollars over the life of the loan.

    Some "Highlights" Within the FICO Score Range

    As mentioned above, the credit score range under the FICO scoring model goes from 300 to 850. So your score might fall anywhere between these numbers. Here are some noteworthy numbers within this range:

    • 850 -- This is the highest score you can have under the FICO system. To my knowledge, nobody has ever reached this number. It represents the top of the scoring range from a computing standpoint. But it's not something you can actually achieve.
    • 800 and up -- If you fall into this credit score range, you should have no trouble getting approved for a home loan (from a credit standpoint, at least). Borrowers with a FICO 800 or higher are also more likely to secure the lowest interest rates available. Scores in this range are considered "excellent" by any yardstick. 
    • 750 -- In the first quarter of 2011, almost half of all mortgage loans went to people with FICO scores in the 750-and-up range. In 2008, only 29 percent of mortgages went to this group. This shows how lending has gotten tighter over the last few years. Data source: Mortgage Bankers Association.
    • 720 -- According to Carolyn Jordan, a senior vice president with Dallas-based Neighborhood Credit Union, a FIO score of 720 or higher will help you qualify for the best mortgage rates. And there are plenty of folks who agree with her. This number is widely regarded as the unofficial cutoff point for getting the lowest interest rates. 
    • 660 -- An FDIC letter from May 2011 offered the following definition for a subprime borrower: A subprime borrower is someone with a higher probability of default "as evidenced by, for example, a credit bureau score (FICO) of 660 or below." So if you fall into this scoring range, many lenders will consider you a subprime borrower. 
    • 640 -- To qualify for a conventional mortgage loan (one that is not insured by the government), you will probably need a score of 640 or higher. This number is not set in stone by any means. But everything I've read so far in 2011 suggests that this is the minimum credit score range for conventional loans. If you fall below this "line," you will have a harder time getting approved for a mortgage. You'll pay more interest as well.
    • 580 or above -- Many home buyers use the FHA loan program to buy a house, because it allows for a down payment as low as 3.5 percent. But if you want to qualify for the lower down-payment option, you'll need a FICO credit score of 580 or higher. This is one of two important numbers pertaining to the FHA program. The other number is 500, which is explained below.
    • 500 -- According to the Department of Housing and Urban Development (HUD), this is the minimum score needed to get an FHA home loan. But that doesn't mean you'll actually get approved for a loan with a credit score in this range. Many of the FHA-approved lenders will require a higher FICO number.
    • 500 or below -- There is virtually no chance of getting approved for a mortgage loan if you fall into this FICO range.

    Let's take a step back and look at the origins of your credit score. It's important to realize that this number isn't conjured out of thin air. It is based on your patterns of borrowing and repaying debts. If you repay all of your debts in a timely fashion, you'll be on the upper end of the credit score range.

    If you routinely miss payment deadlines (or worse, have a foreclosure or bankruptcy in your past), you'll have a lower score. It's as simple as that.

    How Your Financial Activity Becomes a Credit Score

    Feel liking blaming someone for the state of your FICO score? Blame yourself. Wondering how you ended up with such a high score? Give yourself a pat on the back. It all comes from you! Here's a simplified diagram that shows how your financial activity becomes a three-digit number.

    Where Your Score Comes From

    If you want to know what your credit score is based on, you should take a look at your credit reports. When you borrow and repay money (via auto loans, credit cards, mortgages and the like), it gets reported to the three credit-reporting bureaus. You've probably heard their names before: TransUnion, Equifax and Experian. From there, the data gets "fed" into a computerized scoring model of some kind, and it produces a score.

    So in a sense, you create your own credit score. It is based on your own actions. If you want to move into the upper end of the credit score range, you simply need to change your actions.

    Summary: There are different types of credit scores. As of right now, in 2011 - 2012, the FICO model is the one used by most mortgage lenders. This three-digit number shows lenders how well (or how poorly) you have managed your debts in the past. The FICO range goes from 300 - 850. A higher number is better. The closer you are to the top of the scoring range, the easier it will be to get approved for a loan. And vice versa.

    Part 2: How to Get a Better Credit Score ASAP

    If you want to know how to improve your FICO number, be sure to read the companion piece to this article. See the link provided above. It explains the primary scoring factors that are used, and how you can use them to your advantage.

    If you'd like to learn more about what it takes to get a mortgage loan, you can use the search tool at the top of this page. There are more than 800 articles on this website, and most of them are written with home buyers in mind.