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The credit history system was introduced in order to provide banks and other financial agencies with a way to do a thorough background check on customers who apply for loans or credit cards. Of the several services offered by these financial agencies, only loans and credit card approvals require a check of the credit worthiness of the applicant. A customer`s ability to repay the loan borrowed is an important aspect to consider before the bank decides to sanction the loan amount. Without a credit history system or some equivalent, banks and credit card companies will have no way to gauge the risk potential of an applicant.

The credit history is presented in terms of a statement of previous transactions as well as a score. This score is called a credit score. The credit score varies from one person to the next. In general there are three different ranges of scores - the high score, the fair score and the low score. Within each of these independent ranges, the actual score itself is not of great importance. Some banks declare a particular score range as a necessary requirement for loan sanctions. Similarly, credit card companies specify a certain credit score range as the minimum score requirement.

As far as the three ranges of score are concerned, banks and credit card companies usually require any score that falls in the top two ranges - high scores and fair scores. While both are considered adequate for an applicant to be considered for a loan or credit card sanction, the differences in individual scores may translate into differences in benefits and offers proffered by the bank/Credit Card Company. Therefore, to answer the above question, a fair credit score is considered sufficient enough for a loan or credit card sanction.

Maintaining a fair credit score is relatively easy. The credit history is computed over years. The odd late payment will not affect the final score. A good credit score is the result of years of regular timely payments. Most Americans have fair credit scores. Where benefits are concerned, a person with a good credit score may have access to lore interest rates or better pay back policies. But these are arbitrary and vary from company to company. There are no fixed policies that differentiate between fair credit score and good credit score.

A good credit score is dependant on several factors. Those who have managed their loan requests and payments well will have higher chances of scoring high credit points. For the average American, however, only fair credit scores are possible.