What Is a Good Credit Score?
Bad credit negatively impacts your life.
Lenders view you as a riskier borrower, so qualifying for loans and mortgages becomes difficult.
And if you do qualify, your interest rates will be sky-high.
Bad credit can even increase your insurance premiums and make it harder to get a car.
You’re probably wondering, “what is a good credit score?”
Below, I’ll cover everything you need to know about what a good credit score is. I’ll also review some tips on how you can improve your credit.
So, if you want to be part of the 58% of Americans with good credit, continue reading.
What is a Good FICO Score?
Many consumers don’t know this, but there are different types of FICO scores.
Let me explain.
You get a “base” FICO score, which is more general, and it’s for lenders in all industries. This includes credit cards, auto loans, personal loans, and mortgage lenders.
If you’re wondering what is a good credit score, anything between 670 and 739 is considered “good” by FICO.
But you’ll also find industry-specific FICO scores for car loans, credit cards, and mortgages. The same 670 to 739 “good” credit range applies.
These industry-specific scores help lenders understand how well you deal with a certain type of loan.
For example, some consumers will prioritize their mortgage and always pay it on time, but with their credit cards, they’ll sometimes miss payments.
Quick note: Don’t get too caught up on industry-specific FICO scores since they are connected to your “base” score. For instance, if you’re making car loan payments on time, your auto loan FICO score will increase, but so will your “base” score. This makes it easier to qualify for all types of loans, including mortgages and credit cards.
What is a Good VantageScore?
VantageScore is another scoring method that credit agencies use. The newest VantageScore models (3.0 and 4.0) use a range of 300 to 850, just like the FICO model.
If you want to build a “good” VantageScore, you need to aim between 661 and 780, while an “excellent” VantageScore ranges from 781 to 850.
What Affects Your Credit Score?
Now that we’ve answered, “What is a good credit score?” let’s look at five factors that impact your creditworthiness:
- Payment history. The most important factor that credit agencies look at when calculating your credit score is payment history. It is extremely influential and makes up 35% of your credit score.
- Credit utilization. How much money you owe compared to your spending limit is another factor that goes into calculating your credit score. This is also considered extremely influential and accounts for 30% of your credit score.
- Credit history length. The third most important criterion is the length of your credit history, which makes up 15% of your credit score. The longer you’ve been borrowing and have been making timely payments, the better it is for your credit.
- Credit mix. Having a good mix of credit and using credit responsibly contributes to 10% of your credit score. This includes both installment accounts and revolving accounts.
- Recent credit inquiries. The last factor that credit agencies look at is any new, hard credit inquiries. This makes up the remaining 10% of your credit score. So, the more applications you submit within a short frame, the more it hurts your credit.
Why is a Good Credit Score Important?
These are some of the benefits you can expect if you have a “good” or better credit score.
- Easier loan and credit card qualification. One of the first things lenders look at when assessing an application is your credit score. If you have a good credit score, your chances of qualifying improve.
- Lower interest rates. Good credit also gives you more negotiating power because banks see you as a responsible consumer. This makes you eligible for lower interest rates.
- Better chances of getting an apartment. Many landlords will run a credit check on potential tenants before leasing an apartment. Good credit shows landlords that you settle your bills on time and are more likely to make timely rent payments.
- Lower car insurance premiums. Insurance carriers will pull your credit report when you apply for insurance. So if you have a good credit score, you’ll pay lower monthly premiums.
How to Improve Credit Score
Interested in boosting your credit score? Awesome!
You’re on the right track.
Consider these tips, and you’ll be well on your way to achieving an excellent credit score!
Pay Off Your Debt On Time
Settling debts on time is one of the best ways to improve your credit score. This is because payment history is the biggest contributing factor to your credit, making up 35%.
If you miss a payment, it’ll hurt your credit and stay on your credit report for up to seven years.
So if you’re going through a tough time and think you might be unable to pay this month, reach out to your creditors. Sometimes they will offer you a grace period to work with you through any hardships.
Keep Your Credit Utilization Low
Another important factor credit agencies use to calculate your credit score is your credit utilization ratio.
In fact, it makes up 30% of your credit score. This means you’ll want to avoid coming close to or maxing out your credit cards.
Instead, keep your credit utilization below 30%.
For example, if your current credit card company gave you a credit limit of $10,000, you don’t want to carry a balance of $3,000 or more from one billing cycle to the next. So, make sure if you’re spending more, that you pay it off in the same billing cycle.
Keep Credit Card Applications To A Minimum
Lenders typically run a hard credit inquiry when you apply for a new credit card.
This temporarily lowers your credit score.
The problem occurs when you’re applying for several credit cards at once. All those hard inquiries add up and will have a negative impact on your credit score.
This is why I recommend only applying for one or two cards at a time that you believe you have a good chance of getting approved for.
Check Your Credit Report Regularly
When you pull your credit report, you’ll get insight into your payment history, credit age, and credit mix.
Make sure all information is correct and updated. From here, you can see what area is bringing your credit score down and focus on fixing it.
The average age of your accounts also impacts your credit score.
For example, someone with a 20-year credit history will typically have a better credit score than someone who received their first credit card a few months ago (assuming they both make payments on time and don’t have any delinquencies).
So if your credit is on the lower end, be patient.
Understand that growing your credit isn’t an overnight process. Building a good credit score can take months, if not years.
Here’s a video to help explain quick ways to boost your credit score:
Commonly Asked Questions About a Good Credit Score
What is a Good Credit Score to Get a Credit Card?
Each company has different requirements, but most lenders rely on the FICO scoring model. According to FICO, a “good” credit score is in the 670-739 range. That being said, if you have a credit score in the high 600s and mid-700s, you should be able to qualify for most credit cards.
What is a Good Credit Score For a Mortgage?
According to the FICO scoring model, a “good” credit score is anything in the 670-739 range. Keep in mind credit requirements vary from lender to lender. Generally, the higher your credit score, the lower rates you can expect.
What is a Good Credit Score to Buy a Car?
If you want to qualify for a car loan at reasonable rates, a good ballpark to aim for is 670 to 739. Getting an auto loan with low credit is possible, but lenders will view you as a riskier borrower, so you’re likely to be greeted with higher interest rates.
What is a Good Credit Score to Get Approved as a Rental Tenant?
The FICO scoring model claims a “good” credit score is anything in the 670-739 range. Thankfully, most landlords aren’t looking for perfect credit scores. They are interested in your credit history and how well you pay your debts.
What is a Good Credit Score for a Personal Loan?
Different lenders will have different loan requirements. According to FICO, a “good” credit score is anywhere between 670 to 739. This credit score allows you to qualify for most personal loans at decent interest rates.
What is a Good Credit Score By Age?
The FICO credit scoring model defines a “good” credit score as between 670 to 739. Here’s a chart depicting the average credit score in the U.S. by age group:
|Age||Average Credit Score|
Is 700 an Okay Credit Score?
A 700 credit score falls in the “Good” FICO score range. With a 700 credit score, lenders will likely see you as a responsible borrower, allowing you to qualify for credit cards, personal loans, and mortgages at lower interest rates.
How to Get an 850 Credit Score?
You can get an 850 credit score by making timely payments on your credit cards every month, keeping your credit utilization below 30%, and keeping your hard credit inquiries to a minimum. Consistently doing this for several years can help you achieve an 850 credit score.
How to Get a Credit Score of 800?
Payment history, credit length, and credit utilization contribute the most to your credit score. So if you want to get a credit score of 800, make your payments on time, utilize less than 30% of your available credit, and be patient.
What is The Highest Credit Score?
The highest credit score is 850, which is considered perfect credit by most scoring models. An 850 credit score means you have excellent credit management, and the chances of you defaulting on your loans are almost zero. This allows you to qualify for the lowest interest rates available.
What is a Good Experian Credit Score?
A good Experian credit score is anything between 700 and 800. This credit score gives you a great chance of qualifying for most credit cards, and you’ll receive attractive interest rates.