Credit is crucial in today's economy. Your credit score, or FICO, rates credit on a scale of 800 to300, 800 being the highest, 300 being the lowest. Understanding the ins and outs of your credit score will help you to secure the best interest rates on everything from a car to a house to new credit cards.

Good Credit

A good credit score is 700 or above. It is with these scores that you will receive the lowest interest rates, from car loans to mortgages to credit cards. With a score above 720, you will be in the best position to haggle with lenders and receive the lowest rates available.

Average Credit

An average credit score is between 620 and 700. Here you will still receive loans at low interest rates, however, the larger the loan the higher the rate. Shop around when making larger purchases, as at this level lenders and banks are going to vary in terms of what they offer for interest rates.

Low Credit

A low credit score is in the range of 580 to 619. At this level, you are certainly considered a "sub-prime" borrower for mortgages. Your rates will be very high, but both banks and lenders will loan to you. At this level, consider taking out moderate-sized loans and paying them back on time. This will prove to lenders that you are trustworthy, and within a little time, you will see your score increase.

Bad Credit

A FICO score between 580 to 500 puts you in the bad credit category. At this level, it is advised that you do not make large purchases, as the rates will be extremely high. Instead, pay off the debt you have, make smaller purchases on your credit cards and pay them back on time. Taking on too much debt at this level will only increase financial burdens. Consistency will bring you back up to the "low" credit score.

Bottom Line

The meaning of your credit scores differ depending on the type of loan you are seeking. The previously mentioned numbers are a good barometer of where your credit stands, and knowing this will give you more weight at the bargaining table with bankers and lenders.

Source:

Lending Tree: How Bad Credit Affects You

Creditscoring.com: What Is a Good Credit Score?

Credit.com: What Is a Bad Credit Score?