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WalletPrep worksheet · Credit

What is a good credit score?

Name ____________________ Date __________

Key ideas

  1. Good starts at 670 on FICO. Below 580 is poor, 580 to 669 fair, 670 to 739 good, 740 to 799 very good, 800 and up exceptional.
  2. You have many scores, not one. Scores differ by scoring model, credit bureau, loan type and the day they're figured. Small differences between them are normal.
  3. A better range lowers your borrowing cost. In Dana's example, 12% instead of 18% on $10,000 for 3 years saves $1,058 in interest.

Vocabulary

Credit score
A 3-digit number, usually from 300 to 850, that predicts how likely you are to repay debt on time. Lenders use it to set rates.
Credit bureau
A company that collects your credit history and sells reports to lenders. The three nationwide bureaus are Equifax, Experian and TransUnion.

Work it out

Dana needs a $10,000 personal loan over 3 years. Assume a lender quotes 18% at her fair score of 640 and 12% if she reaches a good score of 690.

  1. Interest at 18%, 36 months
  2. Interest at 12%, 36 months
  3. Interest saved in the good range
  4. Payment at 18%
  5. Payment at 12%
  6. Lower payment each month

Check yourself

  1. On the FICO scale, which range is a score of 712?

    • A. Fair
    • B. Good
    • C. Very good
    • D. Exceptional

  2. A loan costs $3,015 in interest at one rate and $1,957 at a lower rate. How much does the lower rate save?

    • A. $958
    • B. $1,158
    • C. $1,957
    • D. $1,058

  3. Why might your score on a card app differ from a lender's?

    • A. One of them must be an error
    • B. They may use a different model, bureau or date
    • C. Checking your score lowered it
    • D. Lenders always subtract 20 points

Your turn

Find a free score in your card or bank app and write down the number and which range it falls in. Then set autopay for at least the minimum on every card and loan so no payment is ever late.

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Answer key

What is a good credit score?

Work it out

  1. Interest at 18%, 36 months$3,015
  2. Interest at 12%, 36 months− $1,957
  3. Interest saved in the good range= $1,058
  4. Payment at 18%$362
  5. Payment at 12%− $332
  6. Lower payment each month= $30
  1. At 18%, 36 payments of $361.53 repay $10,000 with $3,015 in interest. At 12%, 36 payments of $332.15 cost $1,957.
  2. Moving from fair to good saves $3,015 − $1,957 = $1,058, or about $30 a month.
  3. Dana pays her cards down and sets autopay, then checks her score again before she applies. Real quotes vary by lender, so she compares several.

Check yourself

  1. B. Good Good runs from 670 to 739, so 712 is in the good range.
  2. D. $1,058 $3,015 − $1,957 = $1,058.
  3. B. They may use a different model, bureau or date Scores vary with the scoring model, the bureau's data, the loan type and when they're calculated.