Credit Risk Levels

Contrary to popular myth, most lenders are not concerned with the actual number of your Credit Score. Credit Score calculations produce results that span hundreds of possible scores. The PLUS Score calculation used on this website has 500 different possible results (from 330-830). The difference between a 711 and a 712 is mostly inconsequential when making a lending decision. Instead of using the actual number, most lenders use Credit Risk Levels to make lending decisions.

Credit Risk Levels are ranges of Credit Scores that lenders use to determine the risk they take by approving a loan or line of credit. An easy way to think of it is like grades in school. Two people could have gotten an 82 and a 88 on the same test, but both of them got B's. Similarly, two people could have gotten a 653 and a 692 from the PLUS Score Calculation, but both of them would be considered Medium Risk to a lender.

Different Score Calculations Usually Produce the Same Risk Level

Every company that produces Credit Scores uses a different calculation, and so it is very common for your Credit Score to change from one company to another. However, since those scores are just numbers to help determine risk, then the Credit Risk Level those scores end up in are usually pretty similar.

Think about the letter grade example from before. Three different teachers could grade the same paper and give it a 91, a 94, and a 98, but all of those numbers are still A's. Similarly, three different companies could score the same report as a 724, a 736, and a 743, but all of those scores fall into the Low Risk Level.

Lenders Use Credit Risk Levels to Approve Applications and Decide Interest Rates

Most lenders have pre-established rules that their loan officers use when processing applications, and a lot of the time a computer does all the work for them. Once your Risk Level is established, then whether or not you've been approved and what your interest rate will be is automatically decided. On this website, here are the different Credit Risk Levels used, and what they mean:

Plus Score Risk Level Quality Rating What This Means
330-550 Very High Poor Lenders are unlikely to extend new credit to you.
551-625 High Below Average Lenders who extend credit to you will likely attach high interest rates.
626-699 Medium Fair Lenders will likely offer you average interest rates.
700-725 Low Good Lenders will likely offer you good interest rates.
726-830 Very Low Excellent Lenders will likely offer you the best interest rates.

Tools like Score PlannerTM, which is free for everyone, can help you understand how various actions like paying off credit cards or applying for a loan may impact your credit score.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2013, Inc.  All rights reserved.