Credit Ratings

What is a Credit Rating?

It is a mathematical model which takes all the information reported to the agencies that report your ability to handle credit (basically, how you pay your bills).  This mathematical formula then assigns a score to your credit history which gives the potential lender an idea of your credit worthiness.  It is difficult (near impossible) to get the mathematical formula or even get it explained to you.  Only the credit rating companies control this information.

Just because it is a mathematical formula that determines your credit score, do not be lulled into believing it is accurate.  Yes, mistakes are commonly made determining your credit score.  They include but are not limited to:  someone has your same name and is entered on your account, a lender enters an error reporting a payment, they forget to take a bad debt off when it has been taken care of, etc.  So – if you are relying on your credit score, it will be important to check your score and correct any mistakes.  This should be done semi-annually if you are credit active.

Now, what if you are not credit active.  You pay by cash and don’t rely on loans to get what you want.  You probably don’t care about your credit score.  Well. don’t be too cavalier.  Other entities check your score:  insurance companies, phone companies, rental and leasing companies, some employers, etc.

Okay, here are the basic score categories.

850 – Perfect

760-849 – Excellent (You will get the loan and the best interest rate)

700-759 – Great (No trouble getting a loan, pretty good interest rate)

660-669 – Good (No problem getting loan, good interest rate)

620-659 – Fair (May qualify for loan, bad interest rate)

580-619 – Poor (May qualify for loan, high interest rate)

500-579 – Very Poor (Trouble qualifying for loan but, if you do, then extremely high interest rates)


  • Pay your bills on time and for the right amount.
  • Avoid having a lot of credit, even if you can comfortably pay it each month. The more you owe, the lower your credit score will be.
  • Be aware that if you decide to use a debt or credit card consolidation company to help with your debt load, your credit rating can plummet.  It can go from great to very poor in just a few months.
  • Some financing companies can actually hurt credit scores.
  • A lot of credit applications can be viewed negatively.
  • There are more things that can affect your credit score negatively than affect it positively.

Credit Rating Bureaus:

There are over two dozen credit rating agencies.  The best way to get your personal credit score is to visit one of their web sites and see if they offer a free report.  Treat search engines as your friend in this matter.


About Gary

I am retired, but not tired. I still want to be valuable to others. I know that others are valuable to me. After looking back on six decades, I have asked myself this question: “What do I believe?” My mind filled up. My heart started beating faster. My spirit soared. I post blogs to share what my mind is working on, what my heart believes would help others and, what my spirit is communicating to me. What do I believe, you ask? Decisions dictate your path In love, not hate In tolerance, not prejudice In health, not sickness In wealth, not poverty In kindness, rudeness In happiness, not sadness In encouragement, not discouragement In faith, not doubt In courage, not fear I have been and will be challenged in each one of these beliefs, but the biggest belief is to stay positive and not turn negative. This belief helps me maintain all of the others.

2 comments to Credit Ratings

  • Felicia

    My husband and I are in the process of buying a home and I found out in the loan process that I do not have a credit score. I was really excited until I was informed it is almost as bad as having a bad score. The mortgage company had to run an Anthem report, which is a credit score based on the utilities and misc. bills in my name.

  • So having no credit score is “as bad as having a bad score” was stated by your loan officer but you were still approved for the loan because they could do some leg work and check up on how you pay your bills. So – my question back is why even have a credit score if they can determine your credit worthiness by doing a little work checking up on how you pay your bills? In my opinion, this system of rating credit and scoring it is a bureaucracy and wasteful.

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