What is a good credit score?

by Stable MARK | Updated: July 16, 2022
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A good credit score signals to lenders that you're a responsible borrower who is likely to repay what you borrow. Your credit score is an important number that lenders look at when considering you for a loan or line of credit. The FICO® Score ranges from 300 to 850, with a good score falling between 670 and 739. On the VantageScore® range, a good credit score is 661 to 780. If your credit score falls within these ranges, you're in good shape when it comes to borrowing money.

Let’s get started to understand what it means, what affect your credit score and how to improve it.

What is a good credit score?
Image 1: What is a good credit score?

A person's credit score is a numerical rating that falls on a scale from 300 to 850. It is used to signal a person's likelihood of repaying a debt. A higher credit score means that the borrower is lower risk and more likely to make on-time payments. Credit scores are often used by lenders to help them determine if someone is qualified for a loan, what their credit limit should be, and what interest rate they should charge.

Generally speaking, a credit score between 300 and 850 is considered good if it is 700 or above. An excellent score would be 800 or above. Most consumers have credit scores that fall somewhere in the middle, between 600 and 750. In 2020, the average FICO® Score in the United States reached 710—an increase of seven points from 2019. Higher scores tend to make creditors more confident that debtors will repay future debts as agreed. However, creditors may also set their own definitions for what they consider to be good or bad credit scores when evaluating consumers for loans and credit cards.

Creditors may adjust their requirements based on the types of borrowers they want to attract and how current events could impact consumers' credit scores. Some of the lenders create their own custom credit scoring programs. The two most commonly used credit scoring models are developed by VantageScore® and FICO®.

What is a good FICO® score?

There are different types of consumer credit scores created by FICO®. The base FICO® Scores range from 300 to 850, with a "good" score falling anywhere in the 670 to 739 range. There are also industry-specific credit scores with a range of 250 to 900. Even though the range is different, the middle categories still have the same groupings. So a "good" industry-specific FICO® Score is still 670 to 739.

FICO credit score ranges
Figure 1: FICO credit score ranges

What is a good VantageScore?

The VantageScore credit scoring models use a range of 300 to 850, which is the same as the base FICO® Scores. The latest models define 661 to 780 as the good range. This means that if your score falls within this range, you're in good credit standing.

Vantage credit score ranges
Figure 2: Vantage credit score ranges

Credit score ranges

The best credit score you can have is 850. This is the highest possible score on both the FICO® scale and the VantageScore scale, which both use a range of 300 to 850.

Poor credit score range

Fair credit score ranges from 300-579 A score in this range is generally considered poor and will likely result in a rejection of any credit applications you make. But don't despair – with some work, you can improve your credit score and get back on track. A poor credit score (generally accepted as any score below 580) will result in a rejection of credit every time. So if you're looking to improve your chances of being approved for a loan or credit card, you need to start working on your credit score.

While filing for bankruptcy can temporarily bring your credit score down to this level, it is important to continue making your payments on time. Statistically, borrowers with scores this low are delinquent approximately 75% of the time. However, if you make your payments on time, your score should improve. There are certain types of loans, like home loans, that may be difficult to get with a score in this range, but there are still options for getting a mortgage with bad credit.

Fair credit score range

Fair credit score ranges 580-669. Credit agencies may label consumers with credit delinquencies, account rejections, and little credit history as "subprime borrowers," but this doesn't mean they can't qualify for credit. It may just mean they have to pay higher interest rates and penalty fees. However, it is still possible to qualify for the credit, even if you are considered a subprime borrower. So don't let a label stop you from trying to get the credit you need.

If your credit score falls within this range, it's important to take steps to address any specific credit problems you have. This will help improve your score before you apply for credit. It's important to note that borrowers with subprime credit scores are typically delinquent 50% of the time.

Good credit score range

Good credit score ranges 670-739. If you have a credit score over 670, you will be considered less of a risk by lenders and are more likely to be approved for credit.

If you have a top-600s to mid-700s credit score, you are considered a prime borrower. This means you may qualify for higher loan amounts, higher credit limits, lower down payments, and better negotiating power with loan and credit card terms. Only 15-30% of borrowers in this range become delinquent. So if you have a top-600s to mid-700s credit score, make sure to take advantage of all the great benefits that come with it!

Very good credit score range

Very good credit score ranges 740-799. A credit score of 770 is considered the threshold for "good" credit by lenders. If you have a 740 credit score and it's moving up, you're definitely on the right track. Borrowers in this range will almost always be approved for a loan and will be offered lower interest rates. Having a good credit score opens up a lot of opportunities and makes it easier to get approved for loans, so it's worth striving for.

If you have a credit score of 743, you're in good shape. According to FICO, the median credit score in the United States is in this range. Borrowers with this "good" credit score only become delinquent 5% of the time. So if you're looking to borrow money, you shouldn't have any trouble getting approved.

Excellent credit score range

Excellent credit score ranges 800-850. If you have a credit score above 800, you are considered to have excellent credit. This means that you will be greeted with easy credit approvals and the very best interest rates. Consumers with excellent credit scores have a delinquency rate of approximately 2%. So if you want to enjoy the benefits of having excellent credit, make sure you keep your score high.

Even if you have a high credit score, extra points may not improve your loan terms much. Most lenders would consider a credit score of 800 to be just as good as a score of 850. However, having a higher score can give you some wiggle room if negative information appears on your report. For example, if you max out a credit card (resulting in a 20-30 point reduction), the resulting damage won’t push you down into a lower tier.

What affects those two credit score models?

There are several common factors that can affect all of your credit scores. These are often grouped into five categories:

Payment history: Making payments on time can help improve your score while missing payments, having an account sent to collections, or filing for bankruptcy can damage your score.

Credit usage: The number of accounts with balances, the amount owed, and the portion of your credit limit being used on revolving credit accounts all play a role here.

The length of your credit history is a factor in your credit score. This includes the average age of all your credit accounts, as well as the age of your oldest and newest accounts.

The types of accounts you have is another factor, which considers whether you have both installment accounts (such as a car loan or mortgage) and revolving accounts (such as credit cards). Showing that you can manage both types of accounts responsibly is generally helpful for your scores.

Another factor is recent activity, which looks at whether you've applied for or opened any new accounts recently.

FICO® and VantageScore use different approaches to explain the relative importance of the different categories.

Score factors for FICO® model

The FICO® credit scoring system uses percentages to represent the relative importance of each category. However, the exact percentage breakdown used to calculate your score will depend on your individual credit report. The following is the order of importance that FICO® uses when scoring:

  • Credit mix: 10%
  • New credit: 10%
  • Length of credit history: 15%
  • Amounts owed: 30%
  • Payment history: 35%

Score factors for VantageScore® model

VantageScore lists the factors that generally have the most influence on determining a credit score. However, this will vary depending on your unique credit report. VantageScore considers the following factors in this order:

  • Credit history age - less influential
  • New opened accounts: - less influential
  • History of payments: - moderately influential
  • Credit mix and experience: - highly influential
  • Utilization rate, balance and available credit: - extremely influential

What do not affects your credit score?

The following information is not taken into consideration by either FICO or VantageScore when calculating credit scores:

  • Your age
  • Where you live
  • Under U.S. law, credit scoring formulas are not allowed to consider a person's race, color, religion, national origin, sex or marital status. This is to protect people from discrimination when they are trying to get credit
  • The salary you earn, your occupation, your title at your place of employment, your employer, the date you were hired, and your employment history are all factors that lenders may take into consideration when making their approval decisions.
  • Soft inquiries are usually initiated by third parties, like companies making promotional offers of credit or your lender conducting periodic reviews of your existing credit accounts. Soft inquiries also occur when you check your own credit report or when you use credit monitoring services from companies like Experian. These inquiries will not have any impact on your credit scores.

Why there existing different credit scores

Credit scores are a tool that lenders use to make lending decisions. FICO® and VantageScore create different credit scoring models for lenders, and both companies periodically release new versions of their credit scores models. The latest versions might incorporate technological advances or changes in consumer behavior, or better comply with recent regulatory requirements. This is similar to how other software companies may offer new operating systems. Updating your credit score model is important to stay ahead of the curve and maintain a competitive edge.

The VantageScore model is a tri-bureau scoring model, which means it can evaluate your credit report from any of the three major consumer credit bureaus (Experian, TransUnion, and Equifax). The first version (VantageScore 1.0) was released in 2006, and the latest version, VantageScore 4.0, was released in 2017. This latest version was developed based on data from 2014 to 2016, and it was the first generic credit score to incorporate trended data—in other words, how consumers manage their accounts over time.

FICO is an experienced company that was one of the first to create credit scoring models. It creates different versions of its scoring models to be used with each credit bureau's data, although recent versions share a common name. There are two commonly used types of consumer FICO Scores:

  • Base FICO® Scores: Base FICO® Scores range from 300 to 850 and aim to predict the likelihood that a consumer will fall behind on any type of credit obligation.
  • FICO® Scores specific to industries: FICO® creates auto scores and bankcard scores that are specifically designed for auto lenders and card issuers. Industry scores are created with the aim of predicting the likelihood that a consumer will fall behind on payments for a specific type of account. These scores range from 250 to 900.

FICO® periodically releases new suites of scores that build upon a base FICO® Score. The most recent release is the FICO® Score 10 Suite, announced in early 2020. It includes a base FICO® Score 10, a FICO® Score 10 T (which includes trended data), as well as new industry-specific scores.

There are also less commonly used scores. For example, FICO® is slowly introducing the UltraFICO® Score, which takes into account checking, savings or money market account activity when considering a consumer's creditworthiness. Additionally, lenders may develop custom credit scoring models that are tailored to their ideal customers.

Although lenders have the choice of which model to use, some might decide to stick with older versions because of the investment that could be involved with switching. Additionally, many mortgage lenders use older versions of the base FICO® Scores to comply with guidelines from government-backed mortgage companies Fannie Mae and Freddie Mac.

Although you won't know which credit report and score a lender will use before you submit an application, it's important to know that all consumer FICO® and VantageScore credit scores are based on the same underlying information. So regardless of which score a lender looks at, they're all predicting the likelihood that you will become 90 days past due on a bill within the next 24 months.

Monitoring multiple credit scores can help you get a better understanding of your financial health. You may find that your scores vary depending on the scoring model and which one of your credit reports it analyzes. But, over time, you may see they all tend to rise and fall together. This is because the same factors can impact all your credit scores. By monitoring your credit score regularly, you can stay on top of your finances and make sure you're making the best decisions for your future.

Why is important to have a good credit score

Good credit can make it easier to achieve your financial and personal goals. It could be the difference between qualifying for or being denied an important loan, such as a home mortgage or car loan. And, it can directly impact how much you'll have to pay in interest or fees if you're approved. Having good credit is, therefore, an important part of achieving financial security and stability.

A higher credit score could save you a significant amount of money over the lifetime of your mortgage. For example, if you have a 730 FICO® Score instead of a 680 FICO® Score, you could save $69 a month on your mortgage payments for a 25-year, fixed-rate $230,000 loan. That's extra money you could be putting toward your savings or other financial goals. In total, having a good credit score could save you $20,700 in interest payments over the lifetime of your loan.

Your credit score can impact more than just your ability to get a loan. It can also affect non-lending decisions, such as whether or not a landlord will agree to rent you an apartment. So if you're looking to rent a new place, make sure your credit score is in good shape first.

Your credit reports can have an impact on other areas of your life, not just your consumer credit score. For example, some employers may review your credit reports before making a hiring or promotion decision. In most states, insurance companies may use credit-based insurance scores to help determine your premiums for auto, home, and life insurance.

How to improve your credit scores

There are some basic steps you can take to improve your credit scores. By focusing on the underlying factors that affect your scores, you can make a positive impact. Here are some things you can do to raise your credit scores:

It's important to make at least your minimum payment and pay all of your debts on time. Even one late payment can damage your credit scores, and it will stay on your credit report for up to seven years. If you think you might miss a payment, reach out to your creditors as soon as possible to see if they can work with you or offer hardship options.

It's important to keep your credit card balances low. Your credit utilization rate (the amount of credit you're using compared to your credit limit) is a key factor in your credit score. The lower your credit utilization rate, the better your credit score will be. People with excellent credit scores typically have an overall utilization rate below 10%.

It's important to open accounts that will be reported to the credit bureaus. If you don't have many credit accounts, make sure the ones you do have open will be added to your credit report. These could be installment accounts, such as student, auto, home, or personal loans, or revolving accounts, such as credit cards and lines of credit. Having a good mix of both types of accounts is generally seen as positive by lenders.

You should only apply for credit when you actually need it. Applying for a new account can lead to a hard inquiry, which may temporarily hurt your credit scores. The impact is often minimal, but applying for many different types of loans or credit cards during a short period of time could lead to a larger score drop. So if you're not in dire need of new credit, it's best to just hold off on applying.

There are other factors that can impact your credit scores, too. For example, increasing the average age of your accounts could help improve your scores. But often, that's just a matter of waiting rather than taking active steps to improve your credit.

When you check your credit scores, you can also get insight into what you can do to improve them. For example, when you check your FICO® Score 8 from Experian for free, you can also see how you're doing in each of the credit score categories. This can help you identify areas where you need to make some changes to improve your score.

What to do if your credit score is missing

If you want to get a good credit score, you need to make sure your credit reports have enough information in them. For FICO® Scores, you need:

  • An account that's at least six months old
  • An account that has been active in the past six months

So if you want a good credit score, be sure to keep your accounts active and up-to-date.

If you have at least one active account on your credit report, VantageScore can provide you with a credit score. This is even if the account is only a month old.

If you are not scorable, you may need to open a new account or add a new activity to your credit report in order to start building credit. Often, this means starting with a credit-builder loan or secured credit card or becoming an authorized user.

Why is changing your credit score

There are many reasons why your credit score might change, and it's not unusual for scores to go up or down a bit over the course of a month as new information gets added to your credit reports. You may be able to identify a specific event that resulted in a score change. For example, if you made a late payment or opened a new collection account, that would likely lower your credit score. On the other hand, if you paid down a high credit card balance and lowered your utilization rate, that could increase your score.

Paying off a loan might have a negative impact on your credit scores, even though it's a responsible thing to do. This could be because it was the only open installment account you had on your credit report or the only loan with a low balance. After paying off the loan, you may be left without a mix of open installment and revolving accounts, or with only high-balance loans. This could negatively impact your credit score.

For trying to avoid debt, it's a good idea to stop using your credit cards. However, if you don't use your cards at all, your credit score could go down. To keep your account active and build a positive payment history, you may want to use your card for a small monthly subscription and then pay off the balance in full each month.

Remember that credit scoring models use complicated calculations to determine a score. You might think that one event caused your credit score to increase or decrease, but it might just be a coincidence. Also, a single event can't be "worth" a certain number of points—the point change will depend on your entire credit report.

If you've never been late on a payment before, a new late payment could lead to a significant drop in your credit score. This is because it may indicate a change in your behavior, which could mean you're more likely to miss future payments and become a higher credit risk. However, if you have already missed several payments, a new late payment may not have as big of an impact on your score since it's already assumed that you're more likely to miss payments.

How can you check your credit score

It's important to check your credit score on a regular basis. There are now many ways to check your credit scores, including a variety of free options.

Your bank, credit union, lender, or credit card issuer may give you free access to one of your credit scores. Experian also lets you check your FICO® Score 8 based on your Experian credit report for free. So there's no excuse not to stay on top of your credit health.

The type of credit score you receive can depend on the source. While some services may offer you a FICO® Score, others may offer VantageScore credit scores. Either way, the calculated score will also depend on which credit report the scoring model analyzes. Therefore, it's important to compare scores from different sources to get a complete picture of your creditworthiness.

If you're looking to get an accurate picture of your creditworthiness, it's important to check your credit scores from all three major credit bureaus. Experian CreditWorks℠ Premium membership gives you access to your FICO® Score 8 scores from Experian, Equifax, and TransUnion—plus multiple other FICO® Scores based on your Experian credit report. This way, you can be confident you're getting the most complete picture of your credit history.

Keep track of your credit report and score

If you check your credit score before applying for a new loan or credit card, you can get an idea of whether you'll qualify for favorable terms. But if you check your score further in advance, you'll have the opportunity to improve it and potentially save yourself hundreds or thousands of dollars in interest. Experian offers free credit monitoring for your Experian report, which includes not only a free score and report but also alerts if there are any suspicious changes to your report.

By keeping track of your credit score, you can take measures to improve it. This will in turn increase your chances of qualifying for a loan, credit card, apartment, or insurance policy. By improving your credit score, you will also be improving your financial health overall.

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