What is a Good Credit Score?

What’s in a number? When it comes to your credit score, quite a lot. This three-digit financial fingerprint can be the key to unlocking better interest rates, higher credit limits, and even your dream home. But exactly what is a good credit score? Let’s dive into the world of credit and discover where you stand on the financial fitness scale.

MoneyLion offers a free and convenient way to find offers from our trusted partners to help you improve your credit — such as credit monitoring, credit report disputes, and getting credit by paying bills. A good credit score can lead to lower interest rates and increased borrowing power on loans and credit cards.

Good credit score ranges by credit bureaus

Your credit score is a three-digit number based on information collected by the three major credit bureaus: Equifax, TransUnion, and Experian. Credit bureaus keep information on your credit history, such as total available credit and total debt, and are usually updated monthly.

Generally, “good” credit score range are above 670. The average credit score is around 717, so if your score falls in that range, you could already have a “good” score. But remember that a “good” score varies slightly by scoring model.

When you apply for a loan, mortgage, or a place to live, lenders and landlords will use your credit score to judge your application. It tells them the probability of defaulting on the loan or whether they can expect you to make on-time payments consistently. A good credit score can help you access better interest rates with lower fees. Conversely, a bad credit score may prevent you from obtaining financing altogether.

In addition to the two main scoring models—FICO and VantageScore—each credit reporting bureau has its own method of calculating your credit score, so you might notice a difference in your credit scores across the three reports.

Understanding your FICO credit score range

Have you ever heard of the term “FICO score”? It’s an abbreviation of a scoring model created by the Fair Isaac Company (FICO). It’s the largest and most well-known company that uses your credit data to assign you a credit score. FICO scores range from 300 to 850 points and are used in over 90% of lending decisions in the United States.

Factors used to influence your FICO score

Several factors related to how you use credit contribute to your final score. Fortunately, you can improve your FICO score by improving the following areas:

Payment history

Your payment history is the most important factor in calculating your FICO score, accounting for a whopping 35% of it. Do you pay your bills by the payment date every month? Or do you often miss your minimums? To avoid late payments on any cards, set up automatic payments for the full amount or, if you can’t afford it, the minimum due.

Credit utilization

Credit utilization refers to how much of the credit available you use. It’s based on the amount you spend against your credit limit. If you max out your cards every month, you will likely have a high utilization rate. Too much debt will increase your credit utilization rate and could ultimately decrease your score.

People with the best credit scores have credit utilization rates of less than 10%. Credit utilization accounts for 30% of your FICO score, and keeping it below 30% is usually considered good.

Length of credit history

The length of your credit history refers to how long each line of credit you have has been open. The longer your credit history, the more of a reliable borrower you are. The length of your credit history accounts for 15% of your FICO score.

If you opened your first credit card when you were 18 and still have it at 40, you typically have a good length of credit history. You could boost this by becoming an authorized user on the card of someone with a long, good credit history.

New Credit

Your recent activity includes anything you’ve done on your credit report in the last three to six months. Applying for new lines of credit can affect your credit score. The number of new accounts makes up about 10% of your FICO score.

Therefore, applying for new lines of credit can reduce your score slightly in the short run. Refrain from applying for multiple accounts, especially if you plan to make a major purchase soon.

Credit mix

Your credit mix refers to the types of credit on your credit report. From installment loans to credit cards, lenders like to see multiple types of credit on your report to show responsible repayment with both revolving and installment credit. Your credit mix makes up about 10% of your FICO score.

Understanding your VantageScore credit score

VantageScore is FICO’s main competitor and an alternate scoring model some banks and lenders use. The VantageScore model is the product of a partnership between the three major credit reporting bureaus, which we’ll explain in more detail below. VantageScore ranges between 300 and 850.

Factors used to calculate your VantageScore

Like FICO, VantageScore considers financial actions, though it does this differently. Here’s how the VantageScore is weighed:

Payment history

Like the FICO model, your payment history is the most important factor influencing your credit score. It makes up 40% of your VantageScore credit score, even higher than the FICO score.

Age and type of credit

The VantageScore model emphasizes the length of your accounts and the mix of credit types you have available. The age of your credit and the type of credit you have influence 21% of your VantageScore credit score.

Credit utilization

The VantageScore model places less importance on your credit utilization than your FICO score. Credit utilization makes up 20% of your VantageScore credit score.

Total balances

The VantageScore model takes into account how much you owe across your accounts. Your total balances make up 11% of your VantageScore credit score.

New Credit

Like your FICO score, your VantageScore emphasizes your recent credit behavior. The number of new accounts you’ve opened makes up 5% of your VantageScore credit score.

Available credit

How much credit do you currently have available? Your current available credit makes up about 3% of your VantageScore credit score.

What information is not taken into account by credit scores?

Credit scoring models take into account financial actions. U.S. law prohibits scoring models from taking into account receipt of public assistance or personal identification factors not directly related to your financial actions, such as:

Public assistance: Receiving food stamps, grants, or other public assistance cannot affect your credit score.
Race, sex, marital status, age, or where you live: Including any of these as a factor in any credit scoring model is illegal. Even after marriage, each spouse will have a separate credit score.
Consumer rights: Credit bureaus are prohibited from including any actions or exercising your rights under the Consumer Credit Protection Act from your credit score.
Non-bankruptcy public records: Tax liens, civil judgments, and other non-bankruptcy public records can appear on your credit report.
Salary or employment status: Your job, position, or income doesn’t impact your credit score, although they can impact your ability to pay off debt.

Understanding the three major credit reporting agencies

To better understand VantageScore, let’s look at the three reporting agencies that created it.

Equifax

Your Equifax score comes from the items on your Equifax credit report. Equifax uses the FICO scoring model, so its scores range from 300 to 850.

Poor: 300 to 579. If you have a poor credit score, you’re well below the national average. A poor credit score tells lenders that you’re a very risky borrower.
Fair: 580 to 669. A fair credit score is below average. Many lenders approve loans with a fair score, but you might have to pay higher interest rates.
Good: 670 to 739. Most people have a credit score that falls in the good range. You can usually expect access to good interest rates and more loan options.
Very good: 740 to 799. Scores in the very good range are above the national average. A very good credit score tells lenders that you’re a reliable borrower. You can usually expect access to better interest rates and more loan options.
Exceptional: Over 800. Exceptional scores tell banks and other lenders that you’re an ideal borrower. If you have an exceptional credit score, you’ll have access to some of the best rates available, and it’ll be easy to get a loan.

Your Equifax credit score might differ from your Experian or TransUnion score because the bureaus use the VantageScore model.

Experian

Your Experian credit score reflects the information on your Experian credit report. Experian uses the FICO model, and score tiers are as follows:

Poor: 300 to 579. If your credit score is poor, you’re unlikely to be approved for most loans. Only 5% of people fall into this category.
Fair: 580 to 669. If your credit score is in the fair range, you might find some success when you apply for loans. However, you might have higher interest rates or require a larger down payment.
Good: 670 to 739. You can usually be approved for many loans if your credit score is good. The higher your score, the greater the access to the best rates or terms.
Very good: 740 to 799. About 38% of consumers fall into the good credit score range. With a good credit score, you’ll be approved for most loans at competitive rates.
Exceptional: Over 800. If your credit score is exceptional or excellent, you can access the most loan options and the lowest interest rates.

TransUnion

TransUnion is a credit reporting bureau that uses the VantageScore model. It is similar to the Experian credit scoring model. TransUnion’s VantageScore ranges are as follows:

Very poor: Between 300 and 600
Poor: Between 601 and 657
Fair: Between 658 and 719
Good: Between 720 and 780
Excellent: Between 781 and 850

What is the best way to build credit?

Knowing all your credit scores and comparing them is a good idea. This will help you create the best plan to raise your score.

Step 1: Determine your goals

Why do you want to raise your credit score? Do you want to buy a home or get a new credit card approved? Determine your goals and consult with banks or lenders to learn more about specific credit requirements. Or better yet, make big life goals and break down the habits (like on-time payments) you want to establish for life.

Step 2: Monitor credit your score

Did you know you don’t need to subscribe to an expensive service or pay money to access your credit score? Many banks offer free credit monitoring services so you can easily check your score as often as you want, even daily.

MoneyLion’s app also offers free credit monitoring tools to members. You can monitor your credit score, payment history, age of credit, credit utilization rate, credit inquiries, and more.

Step 3: Review your credit report

Your credit reports include information regarding your credit history. They will include credit accounts, missed payments, total credit card debt, current loans you have open, inquiries, and bankruptcies. Not every creditor reports to all three credit bureaus, so each report may differ slightly.

You’re entitled to a free credit report from all three credit bureaus. The Fair Credit Reporting Act allows you to request a free pull of your credit report from each of the three major credit reporting bureaus once every 12 months so you can double-check details, including loans, debt, payment history, as well as your legal name, and current and past addresses.

Step 4: Compare your scores

Take a look at all of your credit reports and compare them. Did you know that about 20% of Americans have an error on their credit reports, which lowers their scores?

For example, certain information could be missing from your report, or a creditor might report someone else’s credit history. Another person’s delinquent mortgage payments could be mixed with yours because they have the same name as you. If you find an error in your report, address it immediately by disputing inaccuracies.

Step 5: Make a game plan

If your credit scores look good, you can move toward your financial goals. But if your scores are low, it’s a smart idea to take steps to improve your credit before you apply for a mortgage or a new credit card.

Some steps you can consider to help boost your score include:

Take out another line of credit: You might assume that you shouldn’t apply for any new lines of credit when you’re trying to raise your score. However, increasing your overall credit line can lower your utilization rate, thereby increasing your score.
Resolve discrepancies: Errors might pop up on your credit report in various ways, from reporting paid-off loans as open to bankruptcies that aren’t yours or inaccurate addresses. Report any errors to the appropriate credit reporting bureau.
Pay down debt: Regularly paying your loans shows that you’re a responsible borrower, and it can help you build your credit score.
Make on-time payments: Making on-time payments on your loans and credit cards is the most important factor in maintaining a good credit score. Try signing up for automatic bill pay to have your minimum payments withdrawn by the payment date and work to pay the rest in full before it’s due to save on interest.
Monitor your credit: Monitor your score over time to see your progress and catch identity theft early. Check with your credit card issuer to see if they offer credit monitoring. Major banks like Citi, Chase, Bank of America, and Capital One all offer free credit monitoring. If you have an account with MoneyLion, you can take advantage of MoneyLion’s credit-monitoring and credit-building features and insights.

Maintaining a good credit score

Once you’ve built a good credit score, the key to maintaining it is to follow the same steps: pay all accounts on time, work to pay off debt, and avoid carrying credit card debt. With consistency, you can establish the habits that make keeping a good credit score almost automatic. You have control over your credit score. Even with a low score today or a credit drop, you can build a good score over time and increase financial opportunities.

FAQ

What is the highest credit score?

The highest credit score for the FICO or VantageScore scoring models is 850. Any score over 800 is considered exceptional.