How Do You Determine What a Credit Rating Score of Excellent or Good Means?

When it comes to the world of credit scores, consumers can get bogged down in confusing terminology. You may learn what your three-digit credit rating score is, but not have an understanding of whether it's considered excellent, good or bad. Or, consumers may be told that they have "excellent" credit, but wonder what that credit score range includes and what the positive effects of excellent credit may be. Understanding key definitions related to credit rating scores can help you determine whether you'll qualify for the perks and privileges associated with "good" or "excellent" credit.

Credit Rating Scores

Companies use a variety of factors to determine your credit rating score. Elements taken into consideration include the type of credit you hold -- for example, installment loans such as student loans, auto loans or home mortgages are viewed more positively than credit cards -- and overall debt loan compared with annual income. Your score is affected by your credit history; on-time payments of more than the minimum required help boost your score, and late or skipped payments will hurt your score. Having a long history with creditors increases your score; opening numerous accounts over a short time indicates you may be scrambling for credit because of poor financial management. Having accounts turned over to collection agencies or filing for bankruptcy can cause your credit rating score to take a big hit.

Excellent

Consumers with credit rating scores of 720 or higher are considered to have excellent credit, according to Lending Tree. Excellent credit rating scores mean that you'll qualify for preferred interest rates, and may be permitted to take out larger loan amounts for home mortgages with less money down, compared with consumers with average or below-average credit. While many consumers pay interest rates exceeding 18 percent in 2011, excellent credit scores may net you interest rates of 10 percent or lower. Once your score skyrockets into numbers over 770, creditors may pay less attention to whether your score is a 775 or 780; you've already established yourself as a trustworthy consumer, according to Credit Scoring.com. The average credit score is around 720, according to the same source.

Good

Good credit scores reflect ratings below 720, but at least 675. Consumers with good credit scores may not qualify for the most preferred loan rates or credit card offers, but should still score decent interest rates and loan offers compared with people with bad credit. Good scores may positively impact your auto loan approval, or increase the chances of landing an apartment lease or job offer. Scores below 620 may result in lenders taking a closer look at your finances before approving applications.

Improving

If you'd like to transition your credit score from good to excellent, first pull your own credit history to identify whether any incorrect information could be dragging your score in the wrong direction. After contacting the three major credit bureaus -- Experian, Equifax and TransUnion -- to correct any errors, continue making on-time payments of more than the minimum until debts are paid off. Avoid taking out new, unnecessary lines of credit, according to the Consumer Federation of America.