As we matriculate through life, every adult at some point learns the value of having a good credit score. However as the saying goes— there are levels to everything. Many are aware of the different variables that come into play when credit scores are computed for consumers— debt to equity ratio, timeliness of payments, active credit lines, to name a few.
However when it comes to measuring a person’s responsibility with credit, there is really no universal standard. Credit reporting agencies each have their own ways of analyzing various data points to customize their proprietary scoring systems. This kind of industry specific variance in reporting methodologies makes it difficult to accurately assess how and why an individual consumer’s credit score arrives at “good” or consequently “bad.”
Commonly, lenders tend to review a consumer’s FICO score, which draws data from the three iconic credit-reporting agencies (Equifax, Experian, and TransUnion). After processing data from the three agencies the lender then applies their own formula and determines what it deems to be a particular consumer’s trustworthiness.
Under their model, the highest score is 850.
If you happen to reach this “Apex” of a credit score — it likely will not matter much to lenders. This is because lenders basically lump all credit scores within the 800 to 850 range together — and anything over 800 is deemed excellent and likely to be treated the same.
Contrary to some estimations, most Americans actually have good credit, which is considered 700 or above.
Percentage wise, approximately 20% of Americans rate at credit scores of 800 and above. Consumers in this category tend to have credit histories of at least 25 years, have been free of late payments for at least the last seven years, use 7% or less of their available credit limits, and owe less than $3,500 on their credit cards. This “magic 20%” consumer group of 800 or above credit score holders are also usually older citizens as well. Of those 30 years of age and younger, only 2% of consumers have managed to achieve a score of 780 or higher.
Which category do you fall into?