The 70-Point Grading Scale
When coins are graded, they are assigned a numeric value on the Sheldon Scale.
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The Sheldon Scale ranges from a grade of Poor (P-1) to Perfect Mint State (MS-70.) Grades are usually assigned at key points on this scale, with the most commonly used points being:
(P-1) Poor - Barely identifiable; must have date and mintmark. otherwise pretty thrashed.
(FR-2) Fair - Worn almost smooth but lacking the damage Poor coins have.
(G-4) Good - Heavily worn such that inscriptions merge into the rims in places; details are mostly gone.
(VG-8) Very Good - Very worn, but all major design elements are clear, if faint.
Little if any central detail.
(F-12) Fine - Very worn, but wear is even and overall design elements stand out boldly. Almost fully-separated rims.
(VF-20) Very Fine - Moderately worn, with some finer details remaining. All letters of LIBERTY, (if present,) should be readable. Full, clean rims.
(EF-40) Extremely Fine - Lightly worn; all devices are clear, major devices bold.
(AU-50) About Uncirculated - Slight traces of wear on high points; may have contact marks and little eye appeal.
(AU-58) Very Choice About Uncirculated - - Slightest hints of wear marks, no major contact marks, almost full luster, and positive eye appeal.
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(MS-60) Mint State Basal - Strictly uncirculated but that's all; ugly coin with no luster, obvious contact marks, etc.
(MS-63) Mint State Acceptable - Uncirculated, but with contact marks and nicks, slightly impaired luster, overall basically appealing appearance. Strike is average to weak.
(MS-65) Mint State Choice - Uncirculated with strong luster, very few contact marks, excellent eye appeal. Strike is above average.
(MS-68) Mint State Premium Quality - Uncirculated with perfect luster, no visible contact marks to the naked eye, exceptional eye appeal. Strike is sharp and attractive.
(MS-69) Mint State All-But-Perfect - Uncirculated with perfect luster, sharp, attractive strike, and very exceptional eye appeal. A perfect coin except for microscopic flaws (under 8x magnification) in planchet, strike, or contact marks.
(MS-70) Mint State Perfect - The perfect coin. There are no microscopic flaws visible to 8x, the strike is sharp, perfectly-centered, and on a flawless planchet. Bright, full, original luster and outstanding eye appeal.
The Three Coin-Grading Buckets
The most misunderstood aspect of coin grading, from the newcomer perspective, is how the grading scale works. Think of it as having three "buckets." The first bucket is for circulated coins; the second bucket is for About Uncirculated (AU) coins, and the third bucket is for Uncirculated (Mint State. or MS) coins. The MS scale (from MS-60 to MS-70) isn't really just a continuation of the previous scale of AU coins. It is a completely separate mini-scale of 11 grades that begins with the "basal state" MS-60 Uncirculated coin. This is an ugly, bag-marked, no-luster dog, but it IS Uncirculated! By comparison, the AU-58 coin beneath
it has attractive eye appeal and nearly full luster. The reason a coin that grades 58 looks much nicer than a coin that grades 60 is because they are really in separate "buckets" of the grading scale.
Likewise, the AU portion of the scale starts at 50 and runs through 59. The AU-50 coin might never have actually circulated in commerce, but because it has scuff marks, has been through several coin-counting machines, and has been handled a small amount, it is no longer in Mint State. So we put it in the AU bucket and give it the bottom grade of AU-50 if it's ugly, and AU-58 if it's not. This is oversimplifying a little, but it demystifies why the grading scale seems to go from "appealing coins" to "ugly coins" and then back to "appealing."
How to Grade Circulated Coins
The third bucket is the range of circulated grades, from P-1 to EF-49 (although EF-45 is the highest circulated grade you'll probably see actually being used.) Most beginners looking for grading help have circulated coins, and fortunately circulated coins are the easiest for the novice to grade. It helps to have a Mint State specimen of the coin type under consideration to make comparisons to, but this isn't a requirement.
Coin Grading Step 1
First of all, you'll need to have an excellent light source, such as a 100 watt bulb in a lamp close to where you are sitting. Secondly, you'll need a decent magnifier, preferably something that magnifies about 5 to 8 times (expressed as 5x to 8x.) Anything stronger than 8x isn't usually used in coin grading, and anything lower than 5x is too weak to see important details and small damage marks.
Coin Grading Step 2
Determine which "bucket" your coin fits into. Is it absolutely Uncirculated (Mint State)? Does it have only the slightest hints of wear on the high points (About Uncirculated)? Or does it fall in the most common bucket, the Circulated bucket?
Coin Grading Step 3
Compare your coin to the scale shown above to determine where it fits on the scale. Keep in mind that the numbers are not proportional; in other words, the amount of detail loss between EF-40 and EF-20 is not the same as that which is lost between MS-60 and EF-40 (remember, they're in different buckets.) In fact, the coin that grades EF-40 has lost only about 5% to 10% of its detail, but the coin that grades F-20 has lost about 60%. Use the written descriptions to place your coin as best you can. If you want more precise grading, I recommend The Official ANA Grading Standards book, which breaks the grades out for every major U.S. coin type, along with photos to help you determine the correct grade.
The Next Step After Grading Your Coins.
You can find out how much a coin dealer will pay you for your coins in my Coin Value Guide.