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The clarity of a diamond can be defined as the internal imperfections that can be seen to the naked eye or under 10x's magnification. These imperfections are called inclusions and there are many different types and sizes. Inclusions can be other minerals that are trapped in the diamond, material that did not crystallize, and tiny cavities. When a diamond has many or intense inclusions it's beauty can be greatly affected. This occurs when the inclusions become so numerous that the light is unable to pass through the diamond properly, leaving it looking dull. The GIA, EGL, & AGS use a clarity grading system to rate a diamond's purity based on the number, size, and placement of inclusions.
When comparing diamonds graded in the same clarity grouping, for example SI1 and SI2, you should know that the lower the number the higher the quality. So an SI1 has fewer or smaller inclusions than an SI2. Diamonds are graded from the top of the diamond or through the table and not from the bottom. Diamonds of even the highest quality grades can have inclusions that are visible to the unaided eye when viewed through the pavilion or bottom of the stone. This occurs because a diamond is designed to allow light to enter the bottom of the diamond and this makes it very easy to look inside the diamond from its backside.
The grading is done under 10x's magnification using a microscope or jewelers loupe. The number of inclusions, the size of the inclusions, and the position of the inclusions determine the final clarity grade. For example, two diamonds may have the same number and size inclusion and yet have different clarity grades. This can occur when one diamond's inclusion is in a more obvious place like the center of the stone. The higher clarity grade may have the same size inclusion but it's in an inconspicuous place, like the outer edge of the diamond.
Accurately graded diamonds should have a gemological certification from an accredited laboratory like GIA or EGL. This gives you assurances that gemological professionals have graded the diamond accurately. Diamonds that have been graded SI2 and higher are indistinguishable from clarity grades of even the highest quality. To the un-trained person the only way to see the difference is to view the diamond under magnification. The diamond's beauty or brilliance is not affected as much by the clarity once you reach quality grades of SI1 and higher, keep this in mind when choosing a diamond for your engagement ring or jewelry.
When selecting a clarity grade consider what you'll be using the diamond for, or what type of jewelry you'll be setting the stone in. Certain clarity grades are more appropriate for specific types of jewelry; for example, a diamond engagement ring generally requires a better clarity rating. This of course is because people will examine the diamond at very close distances and the imperfections will be easier to see. Necklaces, earrings, bracelets, and wedding rings usually don't require as high a clarity rating because the diamonds are either much smaller or won't be viewed at close ranges.
Engagement rings usually require diamond clarity grades of SI and higher, this is the most commonly purchased diamond quality for a center stone when set in a ring. It is also the best value in the jewelry industry today, you'll get a bigger diamond for less and to the average person it will look just as brilliant as even the highest clarity rating. For the consumer who is "quality" minded and would prefer a higher clarity grade we recommend that you choose clarity grades of VS2 and higher. Keep in mind though that higher clarity grades don't always equate to more light performance or brilliance. The quality of the cut, can have more to do with the brilliance and beauty of a diamond than the clarity, to learn more about a diamond's cut read the cut section of Teach Yourself The 4C's Handbook.