What’s A Good Credit Score?

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For a credit score with a range of 300 – 850, a credit score of 800 and above is considered excellent. A credit score of 700 and above is considered good. Most credit scores fall between 600 – 750. High credit scores mean that you’ve made better credit decisions. The scores give creditors confidence that you’ll pay back the loan or other debts agreed upon. In other words, your credit score is much more than just a score.

Credit scores are often utilized by lenders to make important financial decisions. For instances, banks use it for providing mortgage loans. Also, credit card companies and car dealers use the scores to determine the terms on which they’ll offer their services.

Lenders make decisions on whether to offer credit to the individual and the terms of the offer (down payment, interest rate) based on credit scores. You’ll be able to negotiate better terms with lenders if you have a good to excellent credit score.

There are different types of credit scores. The two most common types of credit scores include:

  • FICO Score

  • Vantage Score

Apart from these two types, industry-specific credit scores also exist. You can learn more about credit scores in our credit card and loan guides.

FICO Scores

FICO (Fair Issac Corporation) is one of the most popular types of credit scores. It’s used by many lenders. The credit score is in the range of 300 – 850.

A FICO score above 800 is considered exceptional and a score above 670 is considered good.

FICO Score Ranges

Credit Score Rating Impact
300-579 Poor Applicants are required to pay a deposit or fee. Applicants with this
rating may not get approval for credit.
580-669 Fair Applicants with credit scores in this range are considered subprime
borrowers.
670-739 Good Applicants in this credit score range are considered an acceptable
borrower.
740-799 Very Good Applicants with these scores receive better than average rates from lenders.
800-850 Exceptional Applicants in this score range get the best rates from lenders.

Vantage Score

Vantage Score is one of the most well-known credit scores used by lenders. The Vantage Score was developed by three major credit bureaus (Equifax, Experian, and TransUnion).

The Vantage Score is calculated in the range of 300 – 850. A credit score above 750 is considered excellent and a score above 700 is considered good.

Vantage Score Ranges

Credit Score
Rating
Impact
300 – 549 Very Poor Applicants with this rating may not get approval for credit.
550 – 649 Poor
Applicants with credit scores in this range are considered for credit but the rates may be unfavorable. The applicants will have to make a larger down payment too.
650 – 699
Fair Applicants in this credit score range get credit but the rates are not competitive.
700 – 749 Good
Applicants are approved for credit at competitive rates.
750 – 850 Exceptional
Applicants will receive the best rates and the most favorable terms.

Factors that Affect Credit Scores

The factors that affect credit scores include:

  • Total debt

  • Payment history for credit cards and loans. This includes the severity and number of late payments

  • Number, type and age of credit accounts

  • Credit utilization rate

  • Number of new credit accounts opened

  • Public records (bankruptcy)

  • Number of inquiries on the credit report

Credit Scores Matter

Lenders use credit scores as a decision-making tool. The scores help lenders anticipate whether you’ll be able to pay the loan on time. Credit scores are also popularly known as risk scores. This is because it enables lenders to assess the risk of lending money to a borrower.

A good credit score is important as it’ll determine whether you qualify for a loan. The scores will also determine the interest rates of the loan. When you qualify for a low-interest rate, you’ll save hundreds of dollars on your loan.

FICO Score Factors

  • Less influential – credit mix (the type of accounts) and new credit

  • Moderately influential – length of credit history

  • Highly influential – total amount and debt owed

  • Most influential – payment history on credit cards and loans

Vantage Score Factors

  • Less influential – recent credit inquiries and behavior

  • Moderately influential – total debt and balances

  • Highly Influential – type and age of credit. Percent of credit limit used

  • Most influential – payment history

The following information is not considered for credit scores.

  • Age

  • Place of residence

  • Occupation, salary, employer, title, date employed and employment history

  • Sex, color, race, religion, marital status and national origin

  • There are certain types of inquiries (request for a credit report) that are not considered for credit scores

Minimum Credit Scores

There isn’t a minimum credit score that’s necessary to apply for credit cards or loans. If you have a minimum credit score you’re less likely to qualify for a credit card or loan. You won’t receive favorable rates if your credit score is low.

If you try to apply for a conventional credit card or loan, you’ll have to wait until you improve your credit score. This will ensure that you get the best rates.

Mortgage services such as the Federal Housing Administration (FHA) provide general guidelines for individuals with low credit scores. The guidelines are:

  • FHA mortgage loans require a minimum credit score of 580 or higher with a 3.5% down payment

  • For applicants with a credit score below 580, qualification for a loan is possible only when a 10% down payment is made. The applicants will also have to meet other requirements specified by FHA

Tips for Getting a Good Credit Score

Pay Bills on Time, Every Time

On time payment of all bills help build a track record of responsibility. Missed or late payments of all accounts (credit cards, car loans, mortgages) will impact the credit scores. Avoid skipping payments.

Pay Off Debts

Pay off all debts as quickly as possible. This will help improve your credit score.

Avoid Spending Too Much

Avoid spending more than 30% of the credit limit. Remember that you don’t need to make purchases to improve your credit score. Make small purchases at regular intervals to avoid a period of inactivity.

Check Credit Reports Regularly

Get a free copy of your credit report and check it thoroughly. Check for any incomplete or inaccurate information. If you find any discrepancies, you should correct it immediately. Checking your credit report won’t affect your credit scores.