What is a good credit score?
By Pinnacle Credit Repair 02/26/2023
Credit scores are utilized to anticipate a person’s likelihood of making timely payments for their loans and credit card bills. Although determining what constitutes a good credit score can be challenging.
For a brief response, it is best to start with FICO® and VantageScore®, two prominent credit-scoring companies that generate two of several different credit scores.
However, credit scores are more complex than just those two options. Keep reading to get an in-depth look at credit scores, including how they are computed, who examines them, and how you can monitor and enhance your own score.
Key points:
- Individuals can have multiple credit scores, which can differ depending on how and when they are calculated and the data used to determine them.
- FICO and VantageScore are two popular credit-scoring companies.
- FICO and VantageScore scores usually range from 300 to 850.
- FICO states that good credit scores are between 670 and 739, while VantageScore claims that good scores are between 661 and 780.
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Good credit basics
Before delving into the topic of good credit, it’s important to understand some key facts about credit scores. According to the Consumer Financial Protection Bureau (CFPB), credit scores are typically based on data from your credit reports and are calculated by companies like FICO and VantageScore using complex formulas known as scoring models.
To learn more about the workings of credit, you can watch the following video:
Why are there different credit scores?
Different credit-scoring companies use varying methods to calculate credit scores and may assign different weights to the information in your credit reports. This is why your scores may differ, even if it’s just by a few points, when compared.
What is Considered a Good Credit Score Range?
Determining a good credit score range can depend on various factors, such as the entity that calculates the score, the criteria used to assess the score, and the lender’s credit policies. While credit-scoring companies like FICO and VantageScore can provide an idea of what constitutes a good credit score, lenders have their own credit standards for evaluating creditworthiness.
Nonetheless, some general guidelines apply to different score ranges and how they can affect credit decisions:
- A poor to fair credit score range may make it challenging to qualify for credit cards or loans. Individuals in this range may need to establish credit through a secured credit card or a credit-builder loan. If they qualify for credit accounts, they may have to pay higher fees and interest rates if they don’t pay their balance in full each month.
- A fair to good credit score range may qualify for more credit options but may not receive the best rates or terms. Individuals may qualify for an unsecured credit card but may have a harder time qualifying for a premium card.
- A very good or excellent credit score range may qualify for the best credit products with the lowest advertised rates. While creditors consider other factors besides credit scores when determining eligibility and rates, a high credit score may not hinder their chances.
What’s a good FICO credit score range?
FICO is one of the most common credit-scoring companies and has developed various versions of its scoring models over the years. FICO’s current scoring models are similar to its original model from 1989. A FICO score ranging from 670 to 739 is considered a good score, which is slightly above or near the average score in the US.
What’s a good VantageScore credit score range?
The credit-scoring company VantageScore was established in 2006 by Equifax®, Experian® and TransUnion®, the three major credit bureaus. VantageScore credit scores are used by lenders to evaluate loan and credit applications, and they can be accessed through free monitoring services such as Creditkarma. You can obtain free copies of your credit reports by visiting AnnualCreditReport.com.
For VantageScore, scores ranging from 661 to 780 are generally considered good. VantageScore divides its scores into five groups, using different ranges and names from those of FICO:
What factors impact your credit scores?
Credit scores are determined by credit-scoring models and credit reports, which consider several factors. However, understanding which information from your credit report is being used is essential to improving your score. The Consumer Financial Protection Bureau (CFPB) identifies several factors that typically make up a credit score:
- Payment history: timely payments increase your score, while late or missed payments reduce it.
- Debt: the amount of current unpaid debt across all your accounts, including credit card debt, car loans, and other debts.
- Credit utilization rate: reflects how much of your available credit you’re using compared to how much you have available.
- Loans: the number and types of loans you have, such as revolving credit accounts or installment loans, also known as your credit mix.
- Credit age: how long you’ve had your accounts open and used credit.
- New credit applications: how many times i.e hard inquiries you’ve recently applied for new credit, which may negatively impact your score.
How does FICO view those credit factors?
FICO and VantageScore, two commonly used credit-scoring models, view these factors differently. FICO considers payment history, debt, credit history, credit mix, and new credit, with payment history and total debt being the most significant factors. VantageScore highlights credit utilization, credit mix, experience, payment history, credit age, and new credit, with credit utilization being the most influential factor.
What information do credit scores not consider?
There is also information credit scores do not consider, such as personal information like age, race, nationality, color, sex, gender, or marital status. Credit scores also do not consider where you live or work, income, job status, whether you receive public assistance, political or religious affiliations, interest rates on your credit accounts, and soft credit inquiries. Closed and paid-off accounts will still appear on your credit report and can affect your score until they expire.
How can a good credit score benefit you and is there an ideal credit score based on age?
While age itself doesn’t impact credit scores directly, the length of time you’ve held credit accounts can be a factor in determining your score. However, having a good credit score involves more than just the age of your accounts, as your score can fluctuate throughout your life.
Why is a good credit score valuable?
Having a good credit score can provide numerous benefits, beyond just being able to qualify for loans and credit cards. For instance, good credit can lead to better rates, terms, and credit limits on financial products, as well as lower insurance rates and security deposits on utilities and telecom accounts. Good credit can even make it easier to rent a home, and may impact some job prospects through credit reports.
Pre-approval, pre-qualification and comparing offers
If you have good credit, you may also receive pre-approval or pre-qualification for more credit offers, giving you the ability to compare and find the best fit for your needs. Additionally, a good credit score could lead to higher credit limits, lower interest rates, or both, decreasing the cost of borrowing money and allowing you to pay off debt faster. However, it’s important to understand how credit inquiries can affect your credit score when shopping around for credit offers.
Interest rates and credit limits
There is no ideal credit score based on age, as credit scores are based on a variety of factors beyond just age. While older accounts may have a positive impact on your score, a good credit score is attainable at any age and involves maintaining responsible credit habits over time.
Beyond credit cards and loans
In addition to credit cards and loans, having good credit can have an impact on other aspects of your life, such as:
- Landlords may review credit scores when considering rental applications.
- Certain employers may examine credit reports when assessing job applicants.
- Insurance companies may factor in credit when setting premiums.
- Telecommunication and utility companies may waive security deposits for customers with good credit scores.
How to build a good credit score
Here are some tips from the CFPB on how to build and maintain a good credit score:
- Pay your bills on time. You can set up automatic payments or electronic reminders to help you stay on top of payment due dates.
- Keep your credit usage below 30% of your available credit limit across all your credit card accounts.
- Monitor your credit history over time and establish responsible credit habits.
- Apply for credit only when you need it, and avoid multiple applications over a short period of time.
- Regularly check your credit reports to ensure that they are accurate, since errors in these reports can negatively impact your credit scores.
Frequently Asked Questions About Credit Scores
How can you establish a credit history
For those new to credit or looking to rebuild their credit, there are various products available to help. A secured credit card, student credit card, credit-builder loan, or student loan may be a good starting point.
Is it possible to increase your credit scores quickly?
Building a good credit history can take time, but there are steps you can take to help improve your scores. For instance, paying down the balances on your revolving credit accounts can quickly improve your scores if your credit utilization ratio is high. Alternatively, if there is incorrect negative information in your credit report, disputing the error and getting it corrected promptly can also help.
What could be the reason for changes in my credit scores?
It’s normal for credit scores to change throughout the month as creditors update information about accounts with the credit bureaus. However, it can be difficult to determine the exact cause of the changes.
If you missed a few payments, a sudden drop in your scores could be due to that. But even a small increase or decrease could result from the aging of your accounts or the addition of new payments or updated balances to your credit report.
Moreover, your credit scores may differ depending on where you check them. Different versions of FICO and VantageScore are used, and some lenders have their own customized credit-scoring models for credit decisions.
In general, credit scores are created based on a snapshot of your credit report when they are requested. Therefore, any changes in the credit report can lead to changes in your credit scores.
Good credit scores in a nutshell
To achieve a good credit score, make sure to use credit accounts responsibly and pay your bills on time. Maintaining low credit card balances and avoiding late payments can also help keep your credit in good standing. Consider using a credit monitoring service, such as MyscoreIQ, to keep track of your credit reports and scores.
