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What Is A Good Credit Score?
By Stephanie Colestock MONEY RESEARCH COLLECTIVE
Ah, the credit score. That mysterious three-digit number that dictates so much of our lives, from the financial products and services we can access to how much we’ll pay in interest the next time we take out a loan.
As important as credit scores are, though, they can be quite confusing for many consumers. Here’s a look at what a credit score is, how to check your own score (spoiler alert: you have more than one!), and what counts as a “good” credit score.
- What is a credit score?
- How to check your credit score
- Good credit score FAQs
- Summary of our guide to a good credit score
What is a credit score?
Put simply, your credit score is a three-digit representation of your overall credit history. Depending on the scoring model used, this number can range anywhere from 300 to 900; the higher the number, the better your score and your perceived creditworthiness.
Each month, your credit report is updated by your current creditors and lenders, according to how you manage your open accounts. These accounts often include:
- Credit cards
- Home loans
- Auto loans
- Student loans
- Lines of credit
- Personal loans
- Accounts in collections
- Judgements
- and more
As you take on new debt, pay off existing balances, open new accounts, apply for credit, or close unused accounts, creditors will report this activity to one or more of the three credit reporting bureaus (Equifax, Experian, and TransUnion). These credit bureaus will then update your credit report and maintain those records on a rolling basis until they age off after about seven years.
Each of these accounts is used to calculate your credit score… or more accurately, your credit scores. That’s because there are literally hundreds of different scoring models available, each with its own proprietary calculations.
Types of credit scores
You’ve probably had your credit score offered to you in many different places. These days, credit scoring and tracking are available through credit monitoring services, banks, credit unions, finance apps, credit card issuers, and more. These platforms give you a way to check and track your credit score over time, monitoring changes and even getting alerts along the way.
But you might find that these credit scores vary wildly, or that the credit score a potential lender pulls isn’t the same as the one you’ve been tracking through your bank. So what’s that all about?
Well, each financial institution can use the information from your credit reports to calculate a score in its own unique way. These scoring models often use proprietary formulas, so no two are exactly alike. Even FICO and VantageScore, the most popular credit scoring companies, have multiple different versions of scoring models available.
By and large, FICO is the most commonly-used credit score. Created by the Fair Issac Corporation, the FICO Score 8 model in particular accounts for the vast majority of “credit scores.” So, if you want to know where you stand and whether or not your credit score is Good, getting a hold of your FICO 8 score is the best bet.
What is a good credit score?
Credit models divide scores into different categories. For FICO, the categories are called Exceptional, Very Good, Good, Fair, and Poor. Other credit scoring models have their own credit score ranges and category names, so a “Good” score with one model might be considered Very Good or even Fair with another credit scoring model. But in general:
- Good FICO scores range from 670 to 739.
- Good VantageScores range from 700 and 749.
Pros and cons of a good credit score
A credit score that falls into the Good rating category is one that is considered relatively average, at least as far as American consumers are concerned. For this reason, there are both benefits and downsides to having a Good credit score.
Pros of a good credit score
In general, having a good credit score is a very good thing. This score has the power to unlock certain doors and even save you money over time.
- You’ll likely qualify for most products and services. In general, a Good credit score is often enough to qualify you for the credit cards, lines of credit, and loans for which you apply. Different lenders may have specific score requirements, however, and you may not meet them all; in some cases, a Very Good rating is required instead, so you’ll need to work to increase your credit score.
- You may get lower interest rates. Good credit scores are pretty average, so you can expect average-ish interest rates on loans and lines of credit. Depending on exactly what your score is, the product you’re requesting, and factors like your income, you may qualify for lower interest rates than others with a Good score rating.
- Insurance could be cheaper. Many auto insurance companies will run a soft credit check during the application process. Drivers with good credit can be considered more responsible than those with a tumultuous credit history, so you may qualify for lower premiums.
- Getting a new job might be easier. Some employers run background and credit checks, too, especially if your job will involve working with money or require a security clearance. Having stable finances and a healthy credit score can make you a more enticing candidate than someone in a lot of credit card debt or who fails to pay their bills on time.
- You’ll have higher approval odds on rental applications. Before approving a rental application, landlords and property management companies want to know that you’ll be a responsible tenant who makes on-time payments on time each month. A good credit score shows that you value your credit history.
- You might avoid security deposits. Some utility companies and even cable or cell phone services might require a security deposit with new customers. If you have a good enough credit score, though, this can sometimes be waived as you’re seen as less of a credit risk.
Cons of a good credit score
Good credit is never a bad thing to have. However, there are some downsides to falling into the Good credit rating category.
- You might not get the best rates or terms. A Good credit rating is considered average and is generally a positive thing, but it isn’t the best. With a good credit score, you can often expect to get approved for financial products and services with good terms. But if you want the best possible terms — like lower interest rates, higher credit limits, or reduced down payment requirements — you’ll need a Very Good or even Excellent credit score.
- Mistakes can be more detrimental. Even a single late payment can bring your credit score down considerably. If you already have a low credit score or limited length of credit history, a missed payment might mean a drop of just 30 to 40 points. If you have a high credit score, however, you could see a proportionate drop of over 150 points.
How to check your credit score
There are many ways to check both your credit history and your credit score, oftentimes even for free.
All adults in the U.S. are entitled to receive a free credit report annually from each of the three major credit bureaus. This free copy, which can be requested at AnnualCreditReport.com, should give you an idea of the factors influencing your score and what a potential lender will see if you apply for credit.
These reports don’t automatically include a credit score, though, so knowing how to check your credit score will involve another step.
If you want a free credit score, you can often find these offered by your bank, existing credit card issuers, or through various online personal finance services. Experian also offers a free credit monitoring service that gives you a regularly updated score.
Just know that each of these platforms can give you different credit scores, which may vary from the ones that lenders, credit card companies, and other creditors will use.
What are the factors that affect a credit score?
So what is a credit score comprised of?
Your overall credit history — or the information contained in your credit reports — is used to calculate your credit score. Depending on the scoring model used, these reports can affect your score a bit differently. In general, though, the factors that all credit scoring models will consider include your:
- Payment history — whether you make payments on time and how long you’ve been making those payments
- Credit utilization — how much of your individual and overall credit limits you’re using at any given time
- Hard inquiries — whether or not you’ve applied for new credit in the past year or two, and how many times you’ve done so
- Age of accounts — how long you’ve been managing your consumer credit accounts
- Credit mix — how many different types of loans, credit cards, and other consumer accounts you’ve held
Good credit score FAQs
What is a good credit score by age?
The longer you positively manage consumer accounts, the better your credit score can be. Younger adults with a limited credit history may find it difficult to get approved for new accounts and begin building a healthy score. Regardless of age, however, a good credit score is usually one that falls between 675 and 750 or so.
How do you get an 800 credit score?
An 800 credit score is considered Excellent or Exceptional, depending on the scoring model used. This score can be obtained through a mixture of on-time payments, a variety of different tradelines (types of accounts), a high average account age and low credit utilization.
This means that increasing your available credit limits, reducing your overall debt, making payments on time each month, and limiting the number of new accounts you open can all help you reach a better credit score.
What credit score do you need to buy a house?
Each mortgage lender will set its own credit score requirements. For conventional home loans, lenders may want to see a score of at least 650 or higher. In some cases, a lower score may be accepted in exchange for a higher down payment. Some government-backed mortgages — such as FHA, VA, or USDA loans — may have lower credit score requirements or might waive them entirely.
What are the benefits of a good credit score?
A good credit score makes it easier to get approved for the loans, credit cards, and other financial products you need. It can also unlock lower interest rates, reduced down payment or deposit requirements, better loan terms, and can even help reduce premiums when buying insurance.
What is the average credit score in America?
According to recent data from FICO, the average credit score in the U.S. was 714 in 2021.
What is the best credit score?
The best credit score possible depends on the scoring model you're using. With the FICO Score 8, for example, the maximum score is 850. With the FICO Auto Score and Banking Score, however, the maximum is 900. And with VantageScore 3.0, the best credit score you can have is 850.
Summary of our guide to a good credit score
The average American has a credit score that falls into the “good” rating category. Good credit scores can open many doors for consumers, giving them access to the loans and products they need most and saving them money on interest charges.
Keeping a close eye on your credit history over time is one of the most important things you can do if you’re trying to build a good credit score. This can help ensure that you catch any mistakes or spot fraud as soon as it happens. You’ll also be able to see how your financial practices — like making payments on time and keeping balances low — increase your score over time.
Stephanie Colestock is a DC-based personal finance writer with nearly 11 years of freelance writing experience. She covers a wide range of finance-related topics and is currently working toward her CFP®️ certification. Her work appears on sites such as Business Insider, MSN, Fox Business, CNET, Investopedia, and more.