Credit scores have become a huge part of our lives. They affect everything from our transportation to our homes—you think they could have at least taught a course on it in school. There’s no question a good credit score is crucial for so many varying parts of our lives, but the questions stands—what is a good credit score? What is the score you need to get the best credit card, mortgage, business loan, auto loan, etc., etc.? If you don’t know the answer, you’re not alone. The data shows we’re all confused about credit scores. So, let’s clear that up today. Here is what’s considered to be a good credit score range, as well as how to get a good credit score if you find yours doesn’t fall with in this range.
What Is a Good Credit Score?
While there can be very many different interpretations on what is considered a good credit score, here’s what you can typically expect from a FICO score range:
- Excellent: 800+.
- Very Good: 740-799.
- Good: 670-739.
- Fair: 580-669.
- Poor: 579 and under.
Let’s dive deeper into these definitions below.
What Is Your Credit Score, and Who Calculates Your Score?
Before we get into the different interpretations of what is a good credit score number, let’s make sure you fully understand what a credit score is.
Your credit score is a numerical indication of how responsibly you’ve handled your financial obligations. Lenders and credit card issuers pull credit scores when they’re considering whether to approve a potential borrower or cardholder. Logically, lenders only want to work with the borrowers who pose the least amount of risk of defaulting on their debt. That translates into lending or extending credit to applicants within good credit score ranges.
In other words, your credit score is a three-digit number that quantifies how responsibly you’ve handled debt. Potential lenders look at your credit score to determine whether to offer you a loan, and the cost of that loan should they extend you one. Same thing goes for credit card issuers, who usually set a minimum eligible credit score consumers need to apply for a credit card at all. They’ll base APRs in part on personal creditworthiness, too. As you can imagine, those with higher credit score have the most loan and credit card options available to them, at the lowest interest rates.
But who’s actually in charge of calculating your credit score is a little less cut-and-dry. Basically, the data on your credit reports informs your credit score. Experian, Equifax, and TransUnion are the world’s three biggest credit agencies, and they’re all responsible for generating your credit reports. (Yes, that means you have more than one credit report—and way more than one credit score. More on that later.) The lenders you’re currently borrowing from, and from whom you’ve borrowed in the past, report the data that shows up on your credit report.
Both you and your lender can request to see your score, but neither you nor your lender actually creates that score—that’s the credit bureau’s job. There the one’s who are really defining the answer to what is a good credit score. How the credit bureaus calculate your score is complicated but, don’t worry, we’ll get to that in a bit.
How, When, and Why Your Credit Score Changes
If you’re unhappy with your credit score, don’t panic—that three-digit number is certainly not set in stone. Since your credit usage is dynamic, your credit score is, too. Your report is constantly updated according to the creditors who report information to the credit bureaus, and as the credit bureaus remove old accounts and information, too. And the bureaus calculate your credit score at the moment that you or a lender requests to see it, so the score you see today might be different from the score you saw last month.
To throw another wrench into things, your credit score will differ slightly depending on the lender requesting your score, and which credit bureau they’re pulling from. Every credit agency uses a slightly different model to generate their scores, so your number might fluctuate 20 or so points across the bureaus.
On top of that, certain lenders may use their own, bespoke credit-scoring models. These algorithms are specific to the industry and loan type they’re offering, like insurance loans, mortgage loans, or car loans, so they’re designed to assess a borrower’s riskiness specifically in that loan scenario. For that reason, scores across loan types can vary a bit, too.
Chances are, though, that when your lender requests your credit score, it’ll be calculated using some iteration of the FICO score. FICO is the oldest, and most popular, scoring system in the book, dating back a few decades. We say “some iteration,” however, because over those few decades FICO has altered its algorithm to perfect the accuracy of their risk assessments. FICO 9 is their most recent algorithm, but most lenders use some version of FICO 8. Your FICO score lies somewhere between 300 and 850, and the higher, the better.
Barring FICO, your lender might use the VantageScore scoring model, which the three major credit bureaus developed together about 10 years ago. New VantageScore credit scores also range from 300 to 850, but credit scores calculated with the company’s older system range from 501 to 990.
VantageScore is gaining in popularity, but it’s still nowhere near as common as FICO is. So, for today’s purposes, we’ll refer strictly to your FICO score when talking about what is a good credit score number.
Why Should You Care About Your Credit Score?
Every time a lender considers a loan application, they’re considering the possibility that a borrower might not fully repay that debt. That’s a big risk, and they need some way to clearly measure that risk. That’s the role of your personal credit score. It’s a quick encapsulation of how well, or poorly, you’ve managed debt in the past—and an indication of how well or poorly you’ll handle future debts, too.
Alongside other information on your application, lenders consider your credit score to determine whether to offer you a loan at all, and, if so, at what cost. Being with a good credit score range gives you a much better shot at securing bigger loan amounts, and at lower interest rates.
Your credit score isn’t only a factor in loan and credit card applications, though. It might come into play in other risk-involved decisions, too, like insurance coverage, renting, shopping for utilities and cell phone plans, and as a component of prospective employee background checks.
Breaking Down Good Credit Score Ranges
Knowing the answer to what is a good credit score number can come down to who is providing the credit score and who is asking. For the former, the answer to this question will vary from rating system to rating system. (And, again, as you now know, from algorithm to algorithm, lender to lender, and time to time.) Regardless, the FICO scores range from 300 to 850, or “poor” to “excellent.” Scores on the higher end of the scale demonstrate that you’re responsible with your debt, and that you’re unlikely to fall behind on your loan payments.
As you can imagine, a “good” credit score isn’t quite perfect, but it’s closer to “excellent” than “poor.” Let’s take a look again at the FICO score range and see where most people fall:
- Excellent: 800+. According to Experian, <1% of consumers with excellent credit scores might become delinquent on payments in the future.
- Very Good: 740-799. About 1% of consumers with very good credit scores might become credit risks in the future.
- Good: 670-739. About 9% of people within the good credit score range might become seriously delinquent in the future.
- Fair: 580-669. Approximately 27% of borrowers with fair credit scores might become delinquent on future payments.
- Poor: 579 and under. Approximately 62% of consumers with poor credit scores are predicted to become seriously delinquent in the future.
Keep in mind that this is just one scoring range, but a good credit score range is typically between 670 and 739, give or take a few points on either end. According to the risk-assessment model, only 9% of consumers with good credit scores might become seriously delinquent in their future credit payments. That means most lenders feel comfortable offering their products to good credit-score holders, and at interest rates on the lower end of the spectrum.
How Your Credit Score Stacks Up Against the Average
First: If you don’t already, start monitoring your credit score. This is the best way to keep up with what is a good credit score number and whether or not yours aligns with that. The good news is that you’re entitled to one free credit report from all three bureaus each year, and you should take them up on that offer: In a 2012 study, the Federal Trade Commission found that one in five consumers had an error on their credit report, and 20% of those consumers saw a significant boost in their scores after the bureaus amended those errors.
Feel free to check up on your credit score more than three times per year, though—requesting your own score won’t hurt it.
Once you’ve checked your credit score, you’re probably curious to know how it compares to the national average (fair enough!). 2016 data by Experian shows that Americans had an average credit score of 673—that’s squarely within the good credit score range. And small business owners far outpaced the average consumer, with an average personal credit score of 721. Nice job, SMBOs!
No need to worry if you’re below the “average” small business owner in this regard, though—you have plenty of opportunities to boost yourself into a higher bracket. Next up, we’ll show you how the credit bureaus calculate your score. From there, you’ll learn how you can improve it.
How to Get a Good Credit Score
It’s all well and good to know the numerical value of what is a good credit score (quick reminder: it’s any score between 670 and 739). But to understand what that number really means, and how to get there, you have to know how FICO scores are calculated.
The information on your credit report, both positive and negative, feeds into your credit score. Credit bureaus collect public data, like judgments and collections, plus the information that lenders provide across all your credit accounts. Credit cards, store cards, small business loans, student loans, mortgages, and finance company accounts are all fair game.
The credit bureaus consider some of that information more important than others, though, since some consumer behavior is better predictive of credit risk than others.
Generally, the credit bureaus aggregate consumer behavior in five major categories to come up with their scores. The following weights are pretty standard, and they’ll deviate only slightly from here, depending on the algorithm they’re using. We’ll also show you our top tips on tweaking your spending behavior in each category, so you’ll know how to boost your score to good (and beyond).
1. Payment History: 35%
Your payment history is the most important of the five credit categories, because it contains the information that best reflects how you’ve handled past debt repayments across all your credit accounts. If you want to know how to improve your credit score, look to your payment history first.
This category addresses behaviors like:
- On-time bill payments.
- Details on any delinquencies, like how many late payments you’ve made, how much you owed, and how recently they occurred (recent delinquencies affect your credit score more heavily than older ones).
- Public record information, like judgments, collections, and bankruptcies.
Top tips: Pay all your bills on time, every time—and avoid defaulting like the plague! If possible, set up automatic bill payments with your lenders or card issuers, so you never accidentally miss a payment. If you want to know what is a good credit score number and how to get yours to the score, this is the most influential way to do so.
2. Amounts Owed: 30%
“Amounts owed” refers to the amount of outstanding debt you’re carrying across all your combined credit accounts.
Other considerations in this category include:
- How much balance you’re carrying, and on how many accounts.
- Your credit utilization rate on revolving credit lines. (Or, how close you are to maxing out your credit cards or lines of credit.)
- How much you still owe on your installment loans, like car loans, mortgages, personal loans, or term loans for your business.
Top tips: If you want to know how to increase your credit score, keep your monthly credit card spend well below your credit limit. Also pay off your entire balance each month—contrary to popular belief, carrying a monthly balance doesn’t help your credit score. It just means you’ll be paying extra in interest! Also, as this looks at how much of your total credit you’re using, don’t forget that opening new credit lines that you may not use very much will actually bring down your total credit utilization rate, which is also a good thing. You can also ask your current credit card company for a limit increase—that’s an easy way to increase your total credit. Remember, the key is to get more credit, not necessarily use it (unless you can absolutely pay it back).
3. Age of Credit History: 15%
Longer credit histories (with no or minimum delinquencies) tend to result in higher scores. A clean track record dating back many years indicates that a borrower is consistently responsible with their debt.
This category also measures how long it’s been since you last used your credit accounts, because lenders want to see active (but responsible!) credit usage.
Top Tips: Instead of closing old, unused credit cards, which would decrease the length of your credit history, use them occasionally every month. Or, don’t use them but just don’t cancel them. The bank might eventually, but it is better that they close them than closing them yourself. If you do choose to spend occasionally, be sure to keep your spending well below your credit limit.
4. New Credit: 10%
If you want to what is a good credit score and how to get one, responsibly handling debt is obviously the most necessary action. But opening lots of accounts within a short period of time might end up hurting your score, because all those new accounts pose greater risk.
So, “new credit” looks at how many new credit accounts you have under your belt. Some other questions this category investigates are:
- How long has it been since you opened a new account?
- How many hard inquiries have you had on your report over the past year, and how long has it been since that inquiry occurred? Lenders make hard pulls after you’ve lobbed in your application for a loan or credit card, and they’ll temporarily ding your score a bit.
- How clean is your recent credit history?
Top Tip: Don’t apply for any loan or credit card you come across. Instead, do your due diligence, and only apply for the financing products you truly need and truly qualify for.
5. Credit Mix: 10%
Just as a long history of responsible credit usage indicates a trustworthy borrower, experience in handling several types of credit does, too. The credit mix category of your credit report looks at:
- Whether your credit accounts are installment, revolving, or both.
- Who are the different creditors and credit types.
- How many of each type of credit accounts you have.
Top Tip: Don’t be afraid to open new credit accounts, but be sure you’re only signing on for the debt you need and can comfortably repay on time. Try to diversify the type of credit and creditors if you can.
Having a Good Credit Score Is Important Because…
The “good” before your credit score is more than just an adjective—it shows lenders that you’re a responsible borrower. So when you want to know what is a good credit score number, you really need to understand why it’s so important. It’s a good credit score that can give you a better shot at loan approval, and at lower interest rates. A good credit score range, or any score between 670 and 739 or above on the FICO model, is an asset in other risk-related scenarios, too. Insurance providers, landlords, cellphone and utilities providers, and even your potential employers might pull your credit score to gauge your financial trustworthiness.
Luckily, there are a few ways to boost your credit score. The most important tips? Pay all your loan bills in full and on time, keep your credit utilization as low as possible (but not nonexistent!), and only open the credit accounts you really need. A perfect credit score just might be within reach.