What Is a Good Credit Score?

Whether you’re a first-time homebuyer assessing your credit or someone looking to manage your credit card debt, you’ve probably thought about a credit score. You also might be looking at that three-digit number associated with your credit report and can’t be sure if it’s good or bad. Luckily, you’re not alone, and it’s never too late to learn about what makes a good credit score.

Generally, a good credit score range is somewhere between 660 and 780.¹ Credit scores fall between 300 and 850 to indicate how likely you are to repay a loan. But did you know there are multiple credit score models? Let’s take a look at the different types of credit scores and what counts as “good” for each of them.

FICO and VantageScore

FICO and VantageScore are the two main providers of credit scores.¹ Financial institutions use their services to run credit reports on potential borrowers or credit card customers.

Each company uses their own proprietary software to calculate credit scores based on different models. As a result, your score may vary depending on which company it comes from.

Additionally, FICO breaks scores down into two different types:

• Base scores are created for any financial lender. They’re designed to predict how likely it is that a borrower will fall behind on their debt payments.
• Industry scores, which FICO creates for different industries. For example, credit card issuers and auto lenders each use unique score models for borrowers that range from 250 to 900.²

How are credit scores calculated?

Both companies use different credit score models. They pull data from three consumer credit reporting bureaus: Experian, Equifax, and TransUnion. Each model allocates a certain weight to the various factors that are reported to determine your score¹:

VantageScore

• Credit usage, balance, and available credit — Extremely influential
• Credit diversity and history — Highly influential
• Payment history — Moderately influential
• Credit history age — Less influential
• Number of new accounts opened — Less influential

FICO

• Payment history — 35%
• Amount of money owed — 30%
• Credit history age — 15%
• Credit mix — 10%
• New credit — 10%

How do I know which model my lender will use?

Unfortunately, you can’t really know. Financial institutions are under no obligation to disclose whether they’re using FICO, VantageScore, or both.

While these scores are calculated differently, they all speak to your financial reliability. If you make responsible financial decisions, your score will reflect that — whether it’s coming from FICO or VantageScore.

What is a perfect credit score?

Perfection rarely exists in life. But when it comes to credit scores, “perfect” is an attainable goal. The highest credit score possible is 850, but some providers recognize a score as exceptional if it’s slightly lower.

For example, FICO considers anything from 800 to 850 to be “Exceptional.” VantageScore gives you even more space to breathe, with the lower range of “Excellent” starting at 781.

What’s considered a good credit score?

Most borrowers want to get their credit score in the “Good” to “Very Good” range. For FICO, that means:

• Very Good: 740–799
• Good: 670–739

VantageScore doesn’t have a “Very Good” category. Anything from 661 to 780 is considered “Good,” which makes it a bit easier to hit. However, they do have an extra category at the bottom of the credit score scale: VantageScore considers anything from 300 to 499 to be “Very Poor,” while 500 to 600 is “Poor.”

For a complete comparison of categories, check out the table below.

Why does my credit score matter?

Credit is key for achieving your financial goals, and a good credit score can have a major impact on your life. Credit scores are a reflection of your fiscal responsibility. Lenders and credit card issuers use them to evaluate applications for loans and cards. If you want a mortgage to buy a house or a loan to start a business, a high credit score shows that you can be trusted to pay back your debt.³

A bad credit score can hurt you in other ways. Landlords might not rent to you if your score is too low.³ Home, auto, and life insurance providers often use credit scores to set your premiums. Some employers even make hiring decisions based on how good a potential employee’s score is.⁴

How does my credit score affect my interest rate?

Interest rates are highly dependent on your credit score.³

If you have a positive track record of making timely payments and your credit score is good, you’ll likely have a lower interest rate on a mortgage or other loans. This can end up saving you thousands of dollars, so it’s good to establish a positive credit history before deciding to take out a mortgage for a home or other loans.

Lower credit scores tend to lead to higher interest rates, whether that’s a result of untimely payments or simply a lack of credit history. The good news is you can always improve your credit score with a few different strategies.

How can I increase my credit score?

So how do you get closer to that perfect credit score? Here are a few things to keep in mind:

• The most important thing you can do is pay all your bills on or before their due date. That means paying not only your loan, mortgage, and credit card payments on time, but also your phone bills and utility bills.⁵
• Be mindful of credit utilization, which is the sum of all your balances divided by the sum of your available credit card limits. Keep your utilization ratio low. If you have credit cards, try to keep the available credit percentage in the single digits.⁵
• Only open new lines of credit or take out loans when you absolutely need them. The credit application process can require a “hard inquiry” into your credit score, which dings you a few points each time.
• Make sure the accounts you have open are being reported to credit bureaus.
• Check your credit reports regularly so you know what your score is, and so you can correct any inaccurate information. You can visit www.annualcreditreport.com to request a free copy of your credit report every 12 months from each of the three main credit bureaus. If you request a copy from one bureau every four months, you’ll have a great idea of where you stand year-round. And don’t worry, checking your own credit reports won't ding your credit scores^.5