What is a Good Credit Score? | Credit Score Range
We all make financial decisions affecting our credit scores. These decisions determine whether you can qualify for your first mortgage, finance a car, or take out a personal loan.
Even if you’ve experienced some mishaps, now is the time to learn from mistakes and prepare for a brighter future, especially if you’re trying to build your credit.
But what is a good credit score? And where does yours fall in the credit score range? Read on to learn more about how credit scores work, the credit score range, and why your score is important.
What is a credit score?
Your credit score is a number assigned based on your credit history. This three-digit number indicates to lenders, landlords, and sometimes potential employers your financial responsibility and ability to repay debts.
The United States has three leading credit reporting agencies: Equifax, Experian, and TransUnion. These credit bureaus gather data from creditor accounts and provide that information through credit reports.
To get your credit score, the credit scoring services FICO and VantageScore assign you a three-digit score based on the data reported by Equifax, Experian, and TransUnion. While FICO and VantageScore calculate their credit scores differently, both use a similar credit score range.
Why is your credit score important?
There are many reasons why you should strive for a good credit score. Your credit score determines whether you can:
- Qualify for a mortgage.
- Rent an apartment.
- Finance a vehicle.
- Start a business.
- Turn on utilities without paying a deposit.
- Raise your credit limit.
- Get a cell phone without a hefty security deposit.
- Pay a reasonable auto insurance rate.
Since there’s so much riding on having a good credit score, it’s essential to check it often to know where you stand. You can check your credit score and credit report for free at least once a year through the credit reporting bureaus and scoring agencies. You can also pay to access your credit report if you’ve already checked it within the past year.
What is a good credit score?
Most people’s credit score ranges from 300 to 850. Each credit scoring agency and credit bureau has a slightly different definition of good and bad credit scores. Regardless, the higher the number, the better your credit rating.
For the sake of simplicity, let’s focus on your FICO score. Under FICO, a good credit score starts at 670. While there isn’t a magic number that automatically qualifies you for better loan terms and rates, having a score of at least 670 can improve your financing options.
A good credit score indicates a history of making payments on time. This also means you’ve successfully managed various types of credit and avoided any financial judgments or bankruptcies in recent years.
This isn’t to say that a score less than 670 is necessarily bad. You can still qualify for certain types of credit with a fair credit score – but you won’t enjoy the best interest rates or terms as someone with a higher score.
Specific industries may even have their own definitions of “good credit.” Apartment rental companies, for example, tend to have minimum score requirements between 630 and 650. You must meet or exceed that minimum credit score to move into a new apartment. This is just one instance of your credit score affecting factors beyond borrowing money.
The credit score range
Let’s dive into the specifics of the FICO credit score range:
FICO considers anything from 300 to 579 a poor credit score. A credit score in this range means lenders see you as a high-risk candidate more likely to default on a debt. As such, you may have a more challenging time getting a loan or credit card and will be charged higher interest rates if approved.
A bad credit score can also prevent you from getting a job, contributing to a cycle that makes it difficult to get out of debt.
So, what is considered a fair credit score? A fair FICO score ranges from 580 to 669. You don’t have bad credit in this credit score range, but there’s also plenty of room for improvement.
While you won’t enjoy the most competitive interest rates, you can usually qualify for credit cards, auto loans, and even a mortgage with a fair credit score.
Under the FICO model, a good credit score ranges from 670 to 739.
A good credit score gives you more affordable options for buying or renting a home. You’ll also enjoy better rates on auto loans and credit cards with higher limits. In addition, some states look at credit scores when determining how much you’ll pay for home or auto insurance, so having a good score will help you save on premiums.
Anything between 740 and 799 is considered a “very good” credit score.
You’ve proven to be a financially responsible consumer, make most of your payments on time, and have relatively low balances on your credit cards. As a result, you qualify for lower interest rates, increased limits, and affordable refinancing options.
So, what is an excellent credit score? Anything between 800 and 850 is exceptional.
You can access the best mortgages, credit cards, and competitive loan rates with excellent credit. That’s because lenders know you make every payment on time, have a well-established credit history, and carry a healthy mix of credit products.
Factors that affect your credit score
The key to improving your credit is understanding which factors affect your score:
Your payment history is a significant factor, making up 35% of your overall credit score. Payment history details how you’ve made payments on your accounts since you first established credit.
Don’t worry; a few late payments won’t impact your score much. But keep in mind that a good credit score will suffer if you habitually miss payments or let debts go into collections.
How you use your credit also matters. Credit utilization makes up to 30% of your credit score and describes your debt balances compared to your available credit. You might sometimes see this concept referred to as your “debt-to-income ratio.”
Lenders will likely see you as a low-risk borrower if you make your payments on time and don’t max out your credit cards.
Credit history length
How long your accounts have been open also matters. The longer you’ve had an open and active loan or credit card, the more significant the impact on your credit score.
Having multiple types of accounts in good standing positively reflects on your credit report. Different types of credit that might be worth adding to the mix include student loans, credit cards, auto loans, personal loans, and mortgages.
Opening a new line of credit can increase or decrease your score depending on the circumstances.
A new account will likely boost your credit score if you already have a long, established credit history. At this stage, adding another loan or credit card increases your total available credit and improves your credit utilization.
How to improve your credit score
There are several steps you can take to improve your credit score to access better financial products:
- Review your annual credit report. See where you stand with the major credit bureaus and dispute any errors negatively impacting your credit score.
- Make payments on time. Since your payment history places the heaviest weight on your credit score, avoid missing or making late payments.
- Keep some credit available. Improve your credit utilization by using 30% or less of your credit limits to improve your credit score.
- Catch up on overdue accounts. If you struggle to catch up on outstanding bills, contact lenders and ask about available payment plans.
- Get a secured credit card. A secured credit card requires you to deposit a certain amount of money to open the account. Still, you can use it just as you would a traditional credit card. Secured credit card usage is also reported to the credit bureaus, so responsible use will help improve your score.
- Become an authorized user. Someone you trust can add you to their account as an authorized user. Since the primary account holder is responsible for making payments, their payment habits can help boost your credit score over time.
- Limit hard inquiries. Hard inquiries on new credit requests can negatively impact your credit score – sometimes for up to two years! Hard inquiries occur anytime you apply for a new auto loan, mortgage, credit card, or certain other types of credit. While rebuilding your credit, avoid applying for too many new accounts that would leave multiple hard inquiries on your report.
You don’t need good credit to get an Advance America loan
A bad credit score doesn’t have to hold you back from upward financial mobility. Advance America offers loans for borrowers across the credit score range, so you don’t need good credit to get approved. Our financial products include installment loans, payday loans, title loans, and lines of credit. Fill out an application online from the comfort of your home or visit an Advance America location near you to discuss your options. Once approved, you’ll receive funds quickly – often the same day or within 24 hours. Apply today, and let us help you get back on track!