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In general, a good credit score falls into the range of 690 to 719 in the widely used 300-850 credit score range.
Excellent scores are those of 720 and higher, while fair scores are those of 630 to 689. Scores below 630 fall into the bad credit range.
Lenders, like credit card companies and mortgage providers, have the authority to define “good credit” in their own ways when determining whether to grant you credit and how much interest to charge you.
In actuality, though, having a high credit score is what enables you to obtain the things you desire or need, like lower mortgage rates or instant access to new credit.
Is a credit rating good?
A good credit score is a valuable asset in today’s world. It can open doors to better interest rates on loans, lower insurance premiums, and even better job opportunities. But what exactly is a good credit score, and how do you achieve one?
This comprehensive guide will delve into the world of credit scores, exploring what they are, how they are calculated, and what constitutes a good score. We’ll also provide actionable steps you can take to improve your credit score and unlock the benefits it offers.
Understanding Credit Scores
A credit score is a three-digit number that represents your creditworthiness or how likely you are to repay borrowed money. Credit scores are calculated by credit bureaus such as Experian, Equifax, and TransUnion, based on information in your credit reports. This information includes your payment history, credit utilization, length of credit history, credit mix, and new credit inquiries.
What is a good credit score?
The answer to this question depends on the credit scoring model used. The two most common models are FICO and VantageScore.
- FICO: According to FICO, a good credit score ranges from 670 to 739.
- VantageScore: VantageScore considers a score between 661 and 780 to be good.
Factors that Affect Your Credit Score
Several factors contribute to your credit score. Here’s a breakdown of their impact:
- Payment history (35%): This is the most crucial factor, accounting for 35% of your score. It reflects whether you pay your bills on time, including credit card payments, loans, and utility bills.
- Credit utilization (30%): This refers to the amount of credit you are using compared to your available credit limit. Ideally, you should keep your credit utilization below 30%.
- Length of credit history (15%): This factor considers how long you have been using credit responsibly. A longer credit history generally leads to a higher score.
- Credit mix (10%): Having a mix of credit accounts, such as credit cards, loans, and mortgages, can positively impact your score.
- New credit inquiries (10%): Every time you apply for new credit, a hard inquiry is placed on your credit report, which can temporarily lower your score.
Benefits of a Good Credit Score
A good credit score unlocks numerous benefits, including:
- Lower interest rates on loans: A higher credit score qualifies you for lower interest rates on mortgages, auto loans, and personal loans, saving you money over the long term.
- Better credit card terms: You’ll be eligible for credit cards with lower interest rates, higher credit limits, and better rewards programs.
- Lower insurance premiums: Some insurance companies offer discounts on auto and homeowners insurance to individuals with good credit scores.
- Access to better job opportunities: Some employers use credit scores as part of their hiring process, especially for positions that involve handling money or sensitive information.
- Approval for apartments and utilities: Landlords and utility companies often check credit scores before approving rental applications.
How to Improve Your Credit Score
If your credit score isn’t where you want it to be, don’t worry. There are steps you can take to improve it:
- Pay your bills on time: This is the single most important factor in improving your credit score. Set up automatic payments or reminders to ensure you never miss a payment.
- Reduce your credit utilization: Aim to keep your credit card balances below 30% of your credit limit. If possible, pay down your balances to zero each month.
- Become an authorized user: Ask a family member or friend with good credit to add you as an authorized user on their credit card. This will help you build credit history without having to open a new account.
- Dispute errors on your credit report: Check your credit reports regularly for errors and dispute any inaccurate information.
- Limit new credit inquiries: Avoid applying for multiple new credit cards or loans within a short period, as this can negatively impact your score.
A good credit score is an essential tool for financial success. By understanding how credit scores work and taking steps to improve yours, you can unlock numerous benefits and achieve your financial goals. Remember, building good credit takes time and effort, but the rewards are well worth it.
What is a good FICO score?
Scores between 580 and 669 are deemed “fair” by FICO, while scores between 740 and 799 are deemed “very good.” ” Anything at 800 or above is considered “exceptional. The above image shows the credit score bands from NerdWallet, which are used as a general guide.
FICO comes from Fair Isaac Corp. , the company that first developed a credit scoring system. It makes use of consumer information from TransUnion, Equifax, and Experian, the three main credit reporting bureaus.
What a good credit score can get you
It is important to have good credit because it affects your ability to borrow money and how much interest you will pay. Regardless of whether you intend to apply for credit or not, having a high credit score is beneficial.
A high credit score can assist you in obtaining the following:
- A balance-transfer credit card or an unsecured credit card with a respectable interest rate
- A desirable car loan or lease. When looking for a car, be ready to answer questions regarding negative items on your credit record if your score is 700 or lower. Major credit blemishes are frequently accepted for auto loans, but you might not be eligible for a low rate.
- A mortgage with a favorable interest rate. You don’t need flawless credit to get a mortgage. In some cases, credit scores can be in the 500s. However, because credit scores gauge the likelihood that you won’t make your scheduled payments, lenders reward higher scores by offering lower interest rates.
- An upper hand in the rental application process. Landlords or property managers generally arent looking for immaculate scores. They are interested in your credit record. Find out more about the criteria that landlords use when doing credit checks.
- The ability to open new credit. This adaptability can give you access to travel cards and speciality rewards, as well as assist you in paying bills during an emergency. Whatever the reason, one genuine advantage of having a high score is being able to open a new line of credit when necessary.
A good credit score helps in other ways, too. Those with better credit scores often pay less for auto insurance in several states. In addition, some landlords use credit scores to screen tenants.
What your credit score actually means
FAQ
What’s a good credit score for a?
What is considered a bad credit rating?
How many people have an 850 credit score?
Does a good credit score make a great credit score?
FICO says there’s no “cutoff” where, say, a good credit score becomes a very good credit score, or a very good credit score becomes exceptional. But Experian, one of three major credit bureaus that supply data used in the FICO score, lays out the boundaries this way: 800-plus: Exceptional.
What is a good credit score?
The base FICO ® Scores range from 300 to 850, and a good credit score is between 670 and 739 within that range. FICO creates different types of consumer credit scores. There are “base” FICO ® Scores that the company makes for lenders in multiple industries to use, as well as industry-specific credit scores for credit card issuers and auto lenders.
Is a good credit score good for a loan?
A good credit score can help you get approved for attractive rates and terms when you apply for a loan. But stating whether or not a particular credit score is good is complicated. That’s because the threshold for what’s considered good can vary based on the type of loan you’re applying for and which lender is reviewing your information.
Can a good credit score save you money?
When you work hard to earn a good—or better credit score, the savings can be substantial. The lifetime value of a good credit score can extend into the tens of thousands of dollars. Here are a few examples of how earning a good credit score could benefit you.