In the United States most purchases involving loans or the extension of credit are underwritten based on a given credit score range. The FICO credit scoring system was developed in 1956 and is used by most major banks and lending institutions throughout the world.

The FICO credit score range places people in categories for risk. The system, created by mathematicians, has proven accurate in most cases and is transmitted by all credit check agencies freely with an individual's credit history when they apply for a loan or credit.

The credit score of an individual affects whether or not a person can get a loan. The credit score range in which a person is also determines the amount of interest they will be required to pay and establishes an individuals' probable risk for not paying a loan.

Understanding how a credit score is determined and what each credit score means can be of great benefit to someone who may be considering a large purchase in the near future. It can also be helpful in helping a person begin a strategy to improve their credit score if they need to.

There are several factors included in the calculation of a credit score that come from the credit history of an individual. One of these is the payment history of a person. If there is a poor payment history on loans, credit cards, utilities, etc., this has a big impact on the eventual credit score that a person will have. Other variables that are included in the calculation are the length of the credit history and new credit that has been added recently to the history.

Another factor in the calculation is the amount of money that is owed. Remember this calculation is based on credit history, so if an individual owed a large amount of money in the past and just paid it off, their credit score will not be improved significantly until they maintain a low outgo for some time period.

Another significant variable in credit scoring is the types of credit that an individual has used. If a person has lived on their credit cards and consistently shown on their credit history that this debt cannot be cleared this affects an individual's credit score. The credit score range that is calculated by FICO extends from a low of 300 to a high of 850.

There are certain characteristics that distinguish individuals within each range of credit scores. These characteristics, when examined, make it clear why the individual is in that range and also shows some of the steps they can take to get into a higher credit range.

A person who has a score of 850 is considered to have perfect credit and can get the best discounts and deals that are available when they make a large purchase. These people can qualify for any type of credit card but usually have one emergency credit card that they never use. They pay off their credit cards each month and are never late on any payments. They begin worrying about the next month's bills as they are writing checks for the month they are paying. They only make large purchases on credit when they have enough money in the bank to pay the loan off at any time. They are categorized as the best possible risk for a company, however, these individuals are rarely willing to trust a company that would loan money. It's a catch-22 for lenders.

An individual who falls within the credit score ranges of 700 and above is considered an excellent risk. Again, companies offer these individuals reduced interest rates and discounts for large purchases. But as with the 850 people. The 700 credit range individual rarely makes a purchase that cannot be paid for with savings ahead of time. The score may be the result of a refusal to pay a debt that they felt was unfair or unwarranted. It went on their credit history and they were dinged. This individuals rarely take risks and do not use credit cards excessively. They save up for almost every purchase they make whether it is large or small.

Most people fall somewhere between the two ranges of 580-619 (bad, but not horrible), and 629-679 (OK, but not great). The character traits of both groups are similar. For those in the lower end there have been some bad patches. Perhaps an ongoing medical problem that has created a tremendous amount of debt within the last five years, or losing a job and not being able to pays one's credit cards for a few months more than once. In the second group the same incidents may occur just not as much or as bad. In both cases, these groups have a tendency to use their credit cards as back-up when money gets tight. They generally do not have a lot of money in savings. They buy more large items on credit because they do not have the savings to make the purchase. These individuals tend to almost, but not quite, live from paycheck to paycheck. If there is a significant incident they tend to get a loan to cover it. They usually stay in the same job for a long period of time and only leave when laid off or fired. But the job usually is maintaining the lifestyle of the individual, not helping to increase the lifestyle.

As the economy has become worse and we have seen the United State slip gradually into its second largest recession since the depression, more and more individuals are finding themselves in the 500-580 credit score range. Many of these individuals are living on the "credit" edge. They may have recently been laid off and have been unable to pay any ongoing debts for a period of months or years. They may have recently lost a home to foreclosure so the non-payment of the house payments show on the credit history. It is difficult to get a loan in this credit range and when one does get a loan the interest rates are astronomical. For many people who have just fallen into this range it can be a frightening experience and will take determination and dedication to get out of. But it is possible to improve credit score numbers and enter a range that will provide better interest rates and more opportunities for discounts. Most individuals who have been in this range for some time have filed bankruptcy at least once and do not have a history of staying on the same job for a long term. If they had retirement savings, they used it. These individuals live from paycheck to paycheck on a continual basis and have no savings to cushion them if there is a significant event requiring immediate funds.

Falling in the credit scores range of 499 and below is about as bad as it can get in the world of risk. These individuals may fluctuate to the mid 500s' but normally find themselves facing constant financial crisis. Normally they have filed bankruptcy on more than one occasion and have failed to pay the majority of their credit loans on a timely basis. Their outgo exceeds their income and even they aren't sure how they make it from month to month. Generally these individuals do not worry much about money, where it comes from or where it's going.

No matter what credit score range a person finds themselves in, it is possible to improve credit score values and enter a good credit score range that will provide them with some of the benefits that having a better credit rating bring. It is important that one seeks the advice of a professional when seriously trying to increase their credit rating, so that all the necessary steps required can be taken and the score can be raised quickly.