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What Credit Type Are You?

How important is your credit score?

Your credit score is a vital part of your financial life in the world today. With strong credit, most people can borrow much more than they earn over a given period of time. This additional buying power allows consumers to make major purchases like homes and automobiles now, paying over time, instead of trying to save enough money to make these purchases outright.

Assessing credit risk and credit worthiness

In evaluating whether to help you buy that new home, car or boat, lenders will try to determine whether or not you have the ability, intent and will to pay them back. This is called assessing credit risk. Your credit history (credit score), employment history, residence history and income level are all considered by the lender in making a determination whether to lend you money or not. These same factors help to determine what will be your cost for borrowing the money (interest rate and finance fees).

Benefits and rewards of having good credit

There are many benefits and rewards associated with maintaining good credit including:

  • The ability to borrow (Mortage Loans, Auto Loans, Consumer Credit Loans).
  • Lower auto loan rates.
  • Better mortgage rates.
  • Lower rate credit cards.

  • Generally, the higher your credit risk, the higher your interest rates will be. Lenders rely heavily on an applicant's creditworthiness to make credit approvals and to set interest rates. If you maintain a good credit rating, loans will be easier to get and the cost of that money will be lower. Likewise, if your credit is bad, you will have a more difficult time getting loans, and that money will cost you a lot more.

    Lowering your credit risk

    The first step to lowering your credit risk is to know what your credit score is, know what your credit history looks like, and understand what that means. You should regularly check your credit score at one of the online credit report websites at least every 6 months to a year. By knowing what's on your credit report you will see know what lenders see, and can take steps to correct and improve any credit deficiencies that may exist. While some items on your report can be corrected, others just take time. The bottom line is always pay all your bills on time, all the time.

    So what is my credit type?

    Below are some guidelines that you can use to understand the differences between excellent credit, very bad credit, and everything in between:

    Excellent Credit


  • Minimum FICO credit score usually 685 or higher.
  • Minimum 5 years of credit history.
  • Minimum 5 trade lines.
  • Minimum 3 years "paid as agreed" installment credit (mortgage / auto loan).
  • No utilization of credit card lines.
  • No late payments.
  • Minimum credit inquiries.
  • Being a homeowner helps.
  • One or more years at the same place of employment.
  • One or more years at the same residence.

  • Good Credit


  • FICO credit score usually between 620 and 684.
  • Minimum 3 years of credit history.
  • Minimum 3 trade lines.
  • Minimum 2 years "paid as agreed" installment credit (mortgage / auto loan).
  • No utilization of credit card lines.
  • No delinquent accounts. All trade lines must have current payment history.
  • Being a homeowner helps.
  • Six months or more at the same place of employment.
  • Six months or more at the same residence.
  • No auto repossessions.
  • Bankruptcy must be discharged for at least 2 years.
  • Minimum credit inquiries.

  • Fair Credit


  • FICO credit score usually between 565 and 619.
  • Minimum 2 years of credit history.
  • Minimum 2 trade lines.
  • Minimum 1 year "paid as agreed" installment credit (mortgage / auto loan).
  • Being a Homeowner helps.
  • Multiple late payments.
  • Six months or more at the same place of employment.
  • Six months or more at the same residence. No more than 2 places of residence in the last year.
  • Bankruptcy must be discharged. Re-establishing credit is a positive.
  • Numerous recent credit inquiries.

  • Situational Bad Credit / Slow Pay Credit

    Consumers with prior good credit whose credit or ability to pay has been affected by outside influences. Bad credit or slow pay credit caused by economic or natural disaster like:

  • Divorce.
  • Floods, Hurricanes, Tornadoes, Earthquakes.
  • Illness, injury or disability (long-term or short-term).
  • Employment loss or reduction.
  • Bankruptcy due to medical problems, credit card debt, or loss of income.

  • Bad Credit


  • FICO credit score usually between 400 and 564.
  • Less than 3 years credit history and/or majority bad credit history.
  • Credit cards at or above limits. Extensive credit card use.
  • Little or no "applied for" credit (revolving or installment credit).
  • Multiple delinquent accounts.
  • Multiple collection accounts.
  • Active bankruptcy (Chapter 7 or Chapter 13).
  • Numerous recent credit inquiries.
  • Auto Repossessions.
  • Property Foreclosures.


  • Multiple unapplied for charge-off accounts such as:
  • Bad checks (NSF or Non-sufficient Funds).
  • Unpaid medical bills.
  • Utility bills.
  • Small unpaid charge accounts.

  • Really Bad Credit


  • FICO credit score usually 450 or lower.
  • Multiple bankrupcties (Chapter 13, Chapter 7, dismissed bankruptcies).
  • Multiple repossessions outside of bankruptcy.
  • Significant bad credit after a bankruptcy.
  • Currently delinquent on most/all current obligations.
  • Repossessions within the last year.
  • Multiple bad checks (NSF or Non-sufficient Funds).

  • No Credit


  • FICO credit score usually 0 (zero).
  • No credit history or no credit score reported by any of the 3 major credit reporting agencies.

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