If you plan on applying for a new credit card or loan, there is one important piece of information that determines if your application is approved or denied:
Your Credit Score.
So many people check their credit score, only to end up with a 3 digit number that they have no understanding of. My goal here is to help you understand what your score means for you, how it's calculated, and if it needs some improvement.
725 Credit Score - Is it Good or Bad?
725 is a Good Credit Score! Most lenders and insurers will consider a "Good" credit score as low risk, and is typically enough to receive some of the most competitive loan terms and rates. Although the best offers are generally saved for "Excellent" credit, "Good" is a big step up from "Fair" (a score below 700).
You Probably Got a "FAKE" Credit Score!
Did you get a "Free Credit Score"?
If so, chances are you received what's called a VantageScore. This type of credit score is often referred to as a "FAKO" score, because it is a cheap (or free) imitation created to compete with FICO.
FACT: 90% of lenders check your true FICO Credit Score when determining your eligibility and loan terms - not your FAKO (VantageScore).
FAKO scores are usually provided for free from sources like Credit Karma. Also referred to as an "Educational Credit Score", in my experience they are not typically accurate to your true FICO Score.
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How Does a 725 Credit Score Rate?
Most credit scores including FICO and VantageScore range from 300-850, the higher the better. Within that range, there are different categories, ranging from bad to excellent. Here's a general idea of the ranges and their "ratings". Your range will be indicated below.
- Excellent Credit: 750 - 850
- Good Credit: 700 - 749 ← You Are Here
- Fair Credit: 650 - 699
- Poor Credit: 550 - 649
- Very Poor: 549 and below
What does "Good Credit" mean to you?
A credit score in this range suggests that you have established a good credit history by making your payments on time, and that you don't have any accounts currently past due, or any recent collections, repossessions etc. on your credit report.
It also suggests that you manage your "revolving credit lines" (credit card accounts) pretty well.
Most lenders and insurers will see you as a low credit risk, and you will most likely be offered some very competitive interest rates on loans and low premiums on insurance.
A congratulations is in order, "Good" is good news. However, there is room for improvement. Some of the best interest rate offers may require a credit rating of "Very Good" or "Excellent". Be sure to check our tips and recommendations on how to improve your credit score.
How Is A Credit Score Calculated?
While exact details of how your 725 credit score was calculated is an industry secret, we do know that credit scores are formulated using many different pieces of data from your credit report. This data is grouped into five categories as shown below. The percentage to the right of each one indicates how important it is in determining your credit score.
- Payment History - 35% - This is typically the first thing a potential lender will want to know. Have you paid your past accounts on time? Have you missed any payments?
- Total Amounts Owed - 30% - How much you owe on each of your credit accounts. Higher amounts does not necessarily mean you are high risk, other factors are considered as well.
- Length of Credit History - 15% - Generally a longer credit history will yield higher credit scores. But that's not always the case, it also depends on how often you use your credit, and how responsibly you manage your debt.
- Types of Credit in Use - 10% - Credit score providers will consider the mix of credit accounts you have, such as credit cards, retail accounts, auto loans, mortgages etc.
- New Credit - 10% - Lenders want to know if you've recently been applying for many credit accounts in a short period of time. That can often represent a greater risk to the lender.
Different Credit Score Range Scales
There are many credit scores available to lenders, most use FICO scores, but even those can vary in how they are calculated depending on the version being used. Lenders can also create their own credit score ranges, or use industry specific credit scoring models such as those geared towards mortgages or auto loans.
Here's a quick look at the various credit scoring models and the range they use:
- FICO Score: 300-850
- VantageScore 3.0: 300–850
- VantageScore (versions 1.0 and 2.0): 501–990
- PLUS Score: 330-830
- TransRisk Score: 100-900
- Equifax Credit Score: 280–850
As you can see, having a 725 TransRisk score isn't nearly the same as a 725 FICO score. For that reason, it's also important to know which scoring model is being used to determine how "good" or "bad" your credit really is.
Some of the questions you probably have are: Is 725 a good FICO Score? Is 725 a bad FICO Credit Score? Is a FICO Score of 725 good or bad? What does a FICO Score of 725 mean? What does a 725 FICO Score mean?
Knowledge Is Power - Especially when it comes to credit scores
Did you know if you've received just 1 credit score of 725, you've only seen 16% of your credit data!
You actually have 3 credit scores based on 3 different credit reports. That's 6 different items which are very important for you to have.
Not having access to 100% of your credit data leaves you vulnerable to credit reporting errors, credit fraud, and identity theft.
Make sure you have access to all of your credit scores and reports, I recommend my favorite premium service: Experian Identity Works Premium.
With IdentityWorks Premium, you get 3-bureau FICO scores & reports, and daily monitoring of your Experian FICO score and 3 credit reports, with alerts of key changes to your credit files. Start Your Free 30-Day Trial Now.