What Are Graded Coins and Why Do They Matter?

What Are Graded Coins and Why Do They Matter?

what are graded coins and they do they matter

Here at Mint State Gold, we believe in more than just buying and selling high-quality coins. We also believe in providing top-tier educational content for those either looking to enter the numismatic industry for the first time or those who simply need a brush-up. We hope to unmask a few of the common terms associated with the industry and explain what they mean.

In this article, we’re going to review what coin grading is, and why it matters.

When purchasing any product, it’s important for buyers to have a way to verify the condition and authenticity of the product. After all, the unfortunate truth is that not every salesperson is honest. This makes it critical for there to be some third party to confirm that products are, in fact, what the dealers say they are.

what are graded coins and they do they matter

This is true in every industry, including coins. Without any system of verification, it would be only too easy for less-than-honest salespeople to sell coins for far more than they were worth. The coin grading system was developed to prevent this from happening.

Coins are complicated items with many different factors that play a part in their ultimate value. A few of these factors include rarity, denomination, and metal content. Because there are so many factors and some are more subjective than others, the coin grading system helps protect buyers by keeping coin grades more consistent and objective across the entire industry.

Because of this grading system, collectors can count on this objective, third-party rating system to help determine a coin’s value and authenticity.

The History of Coin Grading

For those of you who are interested in a bit of history, the basics of the coin grading system we use today were created in 1949 by Dr. William H. Sheldon, a numismatist, in his book “Early American Cents.” The system was known as the Sheldon scale and consisted of a range of point values from 1 to 70. The idea behind this scale was that a coin with a rating of 70 would be worth 70 times as much as the coin rated at only 1.

In this way, the value of a coin would increase exponentially with each grade. This grading system was a much simpler version of the scale we used today, and it still forms the basis for the modern grading system.

The PCGS (Professional Coin Grading Service) expanded on this system in 1986, introducing the idea of the objective third-party rating system. To the original Sheldon scale, they added the idea of a letter grade that would accompany the numerical value.

How Coin Grading Works

The point values assigned to each coin range from 1 to 70 — 1 is the lowest rating a coin can have, with 70 being the highest. However, the system is more complicated than coins merely being rated on a continuum.

There’s also the grading element. There’s a list of twelve possible adjectives that can be assigned to a coin. The lowest rank is Poor, and the highest is Mint State. The adjectival grade and the numerals from 1 to 70 work together to classify any particular coin. Although the terms “adjective” and “adjectival” are apt descriptions for the grading element, those terms are not commonly used by numismatists. Instead, the adjectives are represented by one or two letters. The letters are followed by a numeral, except in special cases. Combined, these letters and numbers represent what is referred to as the coin’s “grade”.

Collectors at coin shows will often ask a coin’s grade and will have a good idea of what to expect based on the definitions below. Here is a brief summary of the possible letter grades in order from lowest to highest.

  • Poor or Basal (P or PO): Coins graded as poor are highly damaged or have been worn down to the point where the coin is smooth, and the type is barely readable. It is difficult to recognize any distinguishing details of the coin. The date may be missing or illegible.
  • Fair (F or FR): Similar to the coins graded as poor, fair coins have also experienced heavy damage and wear. They are rated as Fair rather than Poor, however, because just enough of the date will be legible to identify the coin. Any lettering may have vanished, but faint outlines of designs may still be present.
  • About Good or Almost Good (AG): The date and type of About Good coins are both readable, although they may be worn in some spots. There may be signs of additional lettering, although it may not be legible. Designs will be outlined and visible but not easy to distinguish.
  • Good (G): The coin overall has experienced heavy wear and tear, but the major designs and lettering are recognizable if only by their outlines. The details of designs and words will be indistinguishable. Date and type are readable. Although Good sounds like a very positive designation, these coins are actually very worn.
  • Very Good (VG): A Very Good coin will still have medium to heavy amounts of wear, but it will have a full rim and clearly distinguishable designs and features. Most lettering is readable despite the overall worn nature of the coin. A good rule of thumb for coins such as $20 Saint Gaudens is that three or more of the letters in the word LIBERTY must be visible for the coin to be rated Very Good.

what are graded coins and they do they matter

    • Fine (F): Fine coins will be quite similar to Very Good coins as far as distinguishable detail and readability. There will be a defined rim, readable lettering and clear designs with small amounts of recognizable details. Fine coins overall have more moderate wear, although this wear will still be evenly distributed across the coin. For example, on coins such as the $5 Gold Indian Head all seven letters of LIBERTY must be readable, although they may still be faint, for the coin to be rated Fine.
    • Very Fine (VF): Very Fine coins are characterized by less consistent, moderate amounts of wear. The lettering is clearly legible, although still worn. The rims are distinct, and the designs and devices have visible and recognizable details. For example, in order for a Morgan Silver Dollar to be graded Very Fine, all lines on the Eagle’s left wing — as you are looking at the coin — will be visible but may not be clearly distinct.
    • Extremely Fine (XF or EF):> The wear is still obvious, although much less wear than on Very Fine coins, and is primarily limited to the highest points of the coin. The lettering is sharp, and the devices clear. This is the first grade that begins to show the beginning signs of true eye appeal.
    • About Uncirculated (AU): All lettering and designs are sharp and clearly visible, and the only traces of wear are seen on the very highest points of an About Uncirculated coin. These coins still retain a minimum of 50 percent of their original mint luster, giving them a greater level of eye appeal.

what are graded coins and they do they matter

  • Mint State (MS): The Mint State grade is divided into two categories, both of which are abbreviated as MS. Mint State Choice — graded between MS60 and MS64 — signifies a coin that maintains much of its original luster. The main thing separating Mint State Choice from being graded higher is typically a few small blemishes or bag marks. Mint State Gem — graded between MS65 and MS70 — is the highest category and contains coins that are considered gem quality. They are generally quite lustrous with far less bag marks and much better detail than Choice coins. These are the coins that come closer to being almost entirely free from any blemishes than any other uncirculated, business strike coins.

what are graded coins and they do they matter

Brilliant Uncirculated (BU) is another term that describes a type of coin, although this is not technically a grade. BU refers to a coin that has not been circulated. Because these coins have not yet been professionally graded, BU coins are not encased in a holder from a grading service and thus are not labeled with an official grade.

Each letter grade corresponds with a number or a range of numbers. For example, the AU ranking includes numbers 58, 55, 53, and 50. So three different coins might be ranked AU-58, AU-53, and AU-50. Even though all these coins received the same letter grade, they have different numeric ratings and thus are not ranked equally. The AU-50 coin represents the lowest value in the AU category, with the AU-58 coin being the highest, and so on. There are no numbers for each letter grade except those shown below. For example, there is no such thing as an F13 or F14.

The grades and their corresponding numeric values are as follows:

  • P: 1
  • F: 2
  • AG: 3
  • VG: 8,10
  • F: 12, 15
  • VF: 20, 25, 30, 35
  • XF: 40, 45
  • AU: 50, 53, 55, 58
  • MS Choice: 60, 61, 62, 63, 64
  • MS Gem: 65, 66, 67, 68, 69, 70

You might notice that Fair and Fine have the same abbreviation (F) and expect that it would be easy to confuse the two on paper. As you can see, however, with the addition of the numerical values, it would be impossible to confuse the two. A coin rated as F-2 will always be a Fair coin, and a coin rated as F-15 will always be Fine.

What Is Plus (+) Grading?

what are graded coins and they do they matter

As you look at graded coins, you may notice that some grades are followed by the plus sign, and wonder what this signifies.

This plus symbol does not refer to a separate grading system or even an additional grade within the grading system outlined above. Rather, the plus symbol simply indicates that a coin is among the best quality coins within its particular grade. Because of this, coins graded with a plus symbol after their grade may command a higher price.

What is a Proof Coin?

Proof coins are a special type of coin that are set apart from regular — known as Business Strike — coins. A proof coin is minted using a special multi-strike process that results in a highly reflective surface and superior level of detail. Proof coins aren’t intended to ever enter circulation. Instead, they’re intended directly for collectors. Because of this, proof coins have their own special grading system.

Proof coins are abbreviated as either PF or PR depending upon the grading service, PCGS uses PR and NGC uses PF. In addition to the PF or PR designation, proof coins are graded at 60 through 70, with 60 being the lowest and 70 being the greatest, and every number between 60 and 70 is included in the PR/PF range. For example, a proof coin might be graded as PF-63 or PR-67.

How are Coins Graded?

what are graded coins and they do they matter

Of course, having a system this neat and tidy is helpful, but it requires a few extra things to make it function properly. If anyone can pick up a coin and decide they think it ought to be given an MS-64 grade, what stops another person from looking at the very same coin and deciding they disagree, instead thinking the coin should be given an MS-66 grade?

For this grading system to work, there needs to be established, trusted, third-party institutions that rank coins and set the standard for what coins with a particular grade should look like. These people and institutions are known as certified graders.

A certified grader will examine any given coin and complete the following steps as part of their evaluation:

  1. Is the Coin Authentic? The grader examines the coin and verifies it is authentic. This is an extremely important starting point to establish that the coin is even what it appears to be.
  2. Has the Coin Been Tampered With? The grader checks to be sure the coin has not been tampered with or altered in any way that would attempt to increase or alter its value or grade. They ensure the coin is nothing more or less than it should be.
  3. Is the Coin Consistent with Other Coins of the Same Year and Series? The grader examines the quality of the coin’s die and strike characteristics and compares them to the traits on record for other coins of the same year, mint, and series. This ensures the grader can verify and accurately compare the surface quality and details of the coin.
  4. Is the Coin Worn or Damaged? Usually, the important question isn’t whether the coin is worn or damaged, since almost all coins that have been circulated have at least some wear. The more important question is how damaged or worn the coin is. What level of wear has it suffered? During this step, the grader carefully examines the coin for damage and wear to the devices, letters, rim, and more, as well as the overall appearance and loss of original luster.

After each of these four steps is completed, the coin is assigned its official grade.

It may be surprising to realize that it isn’t until the fourth and final step that the coin is even looked at for damage and wear. The other steps have more to do with ensuring authenticity and determining the coin is free of alterations.

What Are Some Professional Coin Grading Companies?

what are graded coins and they do they matter

Technically, anyone can ‘assign’ a grade to a coin. However, it’s only the most respected and well-established coin grading companies, referred to as Top Tier grading services, that truly hold weight in the numismatic industry. If a collector finds a coin that has been graded by a lesser known or lesser respected company, the collector would need to take the coin to one of the Top Tier grading services if they want to ensure the coin is authentic and accurately graded, as well as to help secure the best price possible from a reputable coin dealer if the collector ever wants to sell or trade their coins.

The two most well-known and trusted professional coin grading companies in the business are the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC). These are known as Top Tier coin grading services. While there are other companies in the business, these are the two most well-known and widely respected ones. When a collector buys a coin graded by either of these two companies, they can feel sure they are receiving the real thing.

About the PCGS

In 1985, the rare coin industry was growing in popularity. However, there were some problems hindering that growth. There was no overarching standard for graded coins. Furthermore, the differences between different grades of coins, such as between MS-64 and an MS-65, are almost impossible to see with the naked eye — yet the difference in price value between the two could be significant.

Without a standard, it would be all too easy for someone to sell an MS-64 coin and represent it and price it as if it were an MS-65 coin. The buyer, who would be cheated out of an MS-65 coin they believed they were paying for, would likely never even know they had been cheated until it was too late. Clearly, some universal standard had to be established.

The Professional Coin Grading Service formed and developed the idea that an objective third party needed to grade the coins and set a universal standard for what each grade represented. In 1986, PCGS became that third party. It was imperative that PCGS remained objective and impartial, with no motive for grading a coin higher or lower than its actual value. To maintain this objectivity, PCGS would not have a vested financial interest in the buying or selling of any coins. In addition, they would require a consensus of multiple professional coin graders before any grade was officially assigned.

PCGS began grading coins in 1986 and has helped set and maintain the industry standard ever since.

About the NGC

what are graded coins and they do they matter

NGC, or the Numismatic Guaranty Corporation, came into being in 1987, just one year after PCGS. NGC prides itself on a commitment to accuracy, integrity, and consistency for every coin it grades. Since opening, it has graded more than 39 million coins, backing each one of them with the industry-leading NGC Guarantee that their graded coins are genuine and not over-graded.

Because these two institutions, PCGS and NGC, have been around for so many years and have graded millions of coins, their names mean something. When knowledgeable buyers, sellers, and dealers see either NGC or PCGS graded coins, they can feel certain the coin is authentic, unaltered, and has been graded by an ethical and objective team of professional coin graders that follow an industry accepted grading standard. While other, smaller, coin grading companies have sprung up over the years, PCGS and NGC — the Top Tier grading services — are the two most trusted and well-respected companies in the numismatic industry.

Shop Mint State Gold

what are graded coins and they do they matter

Whether you’ve been involved in the coin collecting or investing business for years or you’re just looking to get started, Mint State Gold is a name you can rely on. We deal primarily with PCGS and NGC graded coins, so you can be sure you’re buying authentic coins that have been graded based on the coin grading industry standard.

We have over 50 years of experience in the business and are excited to help you begin or expand your collection. When you work with us, it doesn’t matter if you have years of experience or none at all. We have the experience to work with long-time collectors, and we also love explaining things to a beginner and helping them get started.

And our job doesn’t end with simply helping you buy and sell your coins. We also believe in the importance of providing education about the numismatic industry and in helping you get up to speed on the most important terms and concepts involved with the industry. We also keep you informed of the latest coin industry events and happenings, as well as on important legislation affecting the numismatic industry as a whole.

So, no matter what stage your coin collection is in, or what level of coin collecting experience you currently have, we know you’ll love what we have to offer in products, services, and support. Browse our online shop anytime. If you have questions about coin grading, buying, selling, or anything else, contact us on our website or give us a call at 1-888-454-0444.

grades and their corresponding numeric

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