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What Is A Good Credit Score?

Aliyyah Camp
Written by Aliyyah Camp

Have you ever wondered what exactly is considered a good credit score? Or why this one number is important in terms of your finances? In this article, we take a look at the different credit score ranges. We also discuss why your credit score matters and how to improve or build credit if you’d like your score to be higher.

Credit Score Range

Your credit score can range from 300 to 850. Here’s a breakdown of how credit score ranges are ranked, according to myFICO:

  • Poor: less than 580
  • Fair: 580 – 669
  • Good: 670 – 739
  • Very Good: 740 – 799
  • Exceptional: 800 and over

It’s important to know that this ranking is a general standard. Each lender has its own methodology for determining what’s a good credit score. For example, one lender may offer its best rates to people with credit scores above 750, while another lender may be more strict and only offer its best rates to people with credit scores above 800.

The average credit score across consumers in the U.S. is 695. Most lenders consider this a “good” score. If your credit score is in this range, many lenders will approve your application for a loan. However, you probably won’t get the lowest interest rate the lender has to offer since your credit score isn’t as high as it could be.

Why Your Credit Score Matters

Your credit score matters for many reasons. To put it simply, having a higher credit score will save you money in the long run. Here are three instances where your credit score matters:

Getting approved for a loan or credit card. The higher your credit score, the higher your likelihood is of getting approved for a new loan or credit card. With the availability of personal loans for debt consolidation and balance transfer credit cards, you can see how important it is to increase your chances of being approved.

Getting the lowest interest rate. Lenders consider your credit score when determining what interest rate to offer you on their financial products. Landing a lower interest rate can save you thousands of dollars over the course of a loan, especially for large loans like mortgages.

Renting an apartment. Landlords/property managers can ask for your credit score during the tenant screening process. Having a poor credit score can lead to your rental application being denied. This is because landlords/property managers see poor credit as an indicator that you may not pay your rent on time or in full every month.

Having no credit can be just as bad as having bad credit. Both are a long way from good credit. On one hand, having no credit means you haven’t necessarily made any drastic financial mistakes. On the other hand, it also means you have no history of paying loans or credit card bills on time. Lenders may see this lack of payment history as risky.

How to Improve or Build Credit

If you’ve found that your credit score is not where you want it to be, there are numerous ways you can fix it. First, to improve or build your credit, you’ll need to know how your credit score is calculated. These five categories make up your credit score at the following percentages:

  • Payment history: 35%
  • Amount of debt: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Improve bad credit. Bad credit can be the result of financial mistakes such as missing credit card payments, having bills go to collection agencies, or defaulting on loans. To get your credit back on the right track, you’ll need to find a financial product designed specifically for people with bad credit. For example, OneMain is known for providing personal loans to people with low credit scores.

Build credit. If you have no credit and are looking to build your credit history, you can do so through a secured credit card. A secured credit card requires you to make a refundable deposit. Then, your payments on the card are reported to the credit bureaus to begin building your credit history. One highly rated secured credit card is the Discover it Secured Credit Card. There are plenty more on the market as well.

How Long Does It Take to Improve Credit?

How long it takes to improve credit depends on so many factors that it’s very difficult to predict the time frame it’ll take for your credit score to go up any number of points. If you just signed up for your first secured credit card, you’re not going to have a score over 800 right away. If you have a poor credit score, but a long credit history, you may find that just getting current on all your bills can have a huge effect on your score. Instead of obsessing over the exact time frame, consider making the process of building or improving your credit a long-term goal.

Final Thoughts

Given that the average credit score in the U.S. is 695, we aren’t doing that bad as consumers. A good credit score can get you approved for loans by most lenders’ standards. It becomes advantageous to have an even higher score when you begin to look at things like interest rates. Lenders reserve their lowest interest rates for consumers with the highest credit scores. If you’re in the market for a loan, whether it be a mortgage or an auto loan, it would be in your best interest to get your credit score as high as possible. With a very good or exceptional credit score, you’ll be offered the best interest rates and save money in the long run.

About the author

Aliyyah Camp

Aliyyah Camp

Aliyyah Camp is a personal finance writer who specializes in writing about ways to save money, make money, build credit, and invest. She has a Bachelor's Degree in Communication from the University of Pennsylvania.

9 Comments

  • I have found that the rules defining credit worthiness need to be standardised. The way I see it is that as long as each financial institute can “make up” their own rules credit scores are going to continue to be arbitrary at best. What it really boils down to is “they who control the money make the rules”. This is certainly obvious when you receive your credit history from the “big 3” that contain the same information and your scores may vary by as much as 100 points. As many people forget, this country is a republic, not a democracy, and republics are run for and by the people with money, lots of money! Or maybe I’m just a “glass half empty” type of person, lol.

  • I recently paid off my 3 year auto lease. I made all payments on time (if not early) and then at the end of the lease term I purchased the auto outright (cash). Nothing else had changed in my credit. Yet, my recent FICO score went down 20 points!! Ugh! What gives?

    • I have been study-ing credit myself for the past 4 years now and – from my observation not knowing your full circumstance – Credit reports like to see a mix (worth 10% of your score) of different accounts in your report. This may account for the downward spiral in your points. I agree makes no sense that I owe less – this is a good thing – but your credit reports like to debt on your report in my opinion – It took me 4 years but I lifted my score from the high 500’s to over 760 – my advice – Do your homework it goes a long way in building your financial profile

  • I agree, but in my case my score does not matter, I am retired, my income is soc sec only and at 900 a month, I don’t gualify for any type of credit…the average senior is like me…my credit was good until I could not work any more, 2 hip replacements.

  • I am concerned that the new method of scoring credit, soon to be implemented by the 3 bureaus, will reduce the value of my credit score. By value I mean my scores worth to a lender.

    When borrowers are given relief from things impacting their credit scores like tax liens and others (I forgot the list of things there are several) by removing them as a condition of a credit score it will impact my hard earned credit scores value. A problem I see no way around unless I am given a higher score for not having any of those things on my credit report to begin with. The problem of boosting my score to allow it to hold its value actually negates what the bureaus are attempting to accomplish and die to this I do not expect to see an increase in the value of my score in the future but I do see a decline in its value.

    I have a very high credit score, nearly exceptional FICO 8 score, that will now be combined with others who presently have only a good credit score using FICO-8 principals. Once this new method of scoring is implemented those with presently considered derogatory information will see some of that information no longer affect their credit scores resulting in higher scores for the group.

    Good for some wanting to look better than they deserve but BAD, BAD, BAD for others because we have nothing to gain, no relief from with this new scoring method designed to make the borderline appear much better. I FIRMLY BELIEVE THOSE WHO ARE NOT AIDED BY THE NEW METHOD OF SCORING SHOULD HAVE THIS REFELECTED IN THEIR EXCEPTIONAL AND NEAR EXCEPTIONAL CREDIT SCORES. Otherwise it will be more unfair for us having those great scores than it presently is for those whose score is diminished by a Tax Lien and other reported items today. Has the lending industry again lost brain cells, as during the housing crisis, or is this actually a good marketing decision. I vote for the prior loss of cells.

    • Contact the credit reporting agencies and present this to them. Because of your great scores, they may be willing to do just that???!!!!

    • You have NOT demonstrated how relief for one group translate into a burden for you and others. can you do that? Show me how removing a tax lien from person A reduces your credit score.

      • I understand how this person stated their concerns BUT READING BETWEEN THE LINES let me offer the following commentary.

        Credit scores for many will improve as a result of the exclusions from scoring to come. I believe what this person is suggesting is their exceptional credit score will be viewed by lenders as less exceptional t under the new rules than it has been viewed prior to the new rules.

        Given the fear lendors may tighten lending to many with scores that had been considered as little risk is not without merit. Certainly if I were a lender I would consider the impact on information I gleam from our credit scoring system after rule implementation. Without surprise many may find loans they qualified for prior to the new rules have become more expensive after rule implementation by way of interest alone. To me this is a VERY VALID CONCERN.

        On the other hand noting accounts were not aided in scoring by the new rule implementation would have the effect of nullifying the purpose of the rule change. Under this scenario a lendor looking at a person who was helped by the rules could easily see they were helped which would in essence put them back to the same position they assumed under the old rules.

        Therefore it seems the only equitable method to discern the consumers not having received aid from the rules would be to raise their score by an equitable amount to show they are in fact better credit risk. Unfortunately this method of resolution also would carry the negative benefit of somewhat negating the purpose of the rule change.

        Bottom line, I see this rule implementation as needed but also presenting a catch 22 for borrowers who received no benefit from this new way of scoring borrowing expectations.

        • This will not affect someone with a good credit score but will give those that suffered in the past with derogatory credit items to get another shot to get back in the game. There’s nothing wrong with that though some see it as; “why did I work so hard to keep my score high when others screwed up and can now be on equal ground?” It’s like a ball player that strikes out 4 times in the game and gets booed and then in the last inning hits the game winning home run. Everyone deserves a second chance.

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