The Meanings of Excellent Credit Ratings

An excellent credit rating gives consumers a significant boost when seeking loan financing. Creditors use scores from major reporting bureaus to evaluate your credit worthiness. The higher your credit score, the better your potential to get the best interest rate and most favorable terms possible on a loan request.

FICO Score

Developed by the Fair Isaac Corp., the FICO scoring system serves as the major model for the three major credit reporting bureaus commonly used by lenders in the U.S. Your individual FICO score includes a number of specific items, but five basic categories are used in the computation, according to MyFICO. These include your payment history, amounts owed, length of credit history, new credit and types of credit used. Experian, Equifax and TransUnion, the three major reporting bureaus, all have modified scoring systems based largely on the FICO scoring model.

Ratings Breakdown

Many people generally assume a credit score over 700 is a benefit when seeking a loan. However, the specific scoring breakdown and its interpretation has increased over time as more consumers understand the traits used in scoring. According to the Moolanomy February 2011 article "What is a Good Credit Score Range?" in "Excellent" credit score falls between 760 and 849, though 850 is technically the highest possible score. A score in this range gives you the best financing advantages. A "Great" credit score is 700 to 759, a "Good" credit score is 660 to 699, an "Average" credit score is 620 to 659. A "Poor" credit score is 580 to 619. A "Very Poor" credit score, which limits your ability to get a loan at all, is below 579.

The Perfect Score

Though 850 is the technical high end, Dana Dratch points out in her June 2008 Bankrate article "Perfect credit score: unrealistic, unnecessary" that borrowers with an 850 score are rare. While consumers should try to achieve their best credit score possible, a move between 775 and 850 has little consequence on your borrowing potential, Dratch writes. This high end of the "excellent" scoring range is where you want to keep your score. However, jumping up a few points once you are there has little effect on rates and terms.

Getting an Excellent Credit Score

Achieving an excellent credit score requires a combination of awareness and good borrowing behavior. More consumers are aware of the components important to credit score, and applying that awareness through good credit behaviors and consistency is critical. Making on-time payments without fail and having a low credit utilization ratio are a couple of the more critical aspects of reaching and maintaining excellent credit, according to Dratch's article. Credit utilization refers to the portion of your available credit in use. A 25 percent to 35 percent credit utilization is typically a recommended limit, but as closer to 0 percent utilization is a good goal.