What Is a Good Credit Score?
A quick guide explaining credit scores, including how they work, what’s considered good and why they’re valuable
Credit scores are used to predict how likely a person is to pay back a loan on time. That’s simple enough. Trying to explain what a good score is can be more difficult. This article will explore some of the reasons why. But if you’re just looking for a quick answer, it’s probably best to start with popular credit-scoring companies FICO® and VantageScore®:
- FICO says good credit scores fall between 670 and 739. That’s on a scoring range from 300 to 850.
- VantageScore’s good scores are reported to fall between 661 and 780, also on a 300–850 range.
But there’s a lot more to it than that. So keep reading to take a closer look at credit scores, including how they’re determined, who’s looking at them and what you can do to monitor and improve yours.
Good Credit Basics
It may help to establish a few things about credit scores before going any further. According to the Consumer Financial Protection Bureau (CFPB), scores are typically based on information from your credit reports. And they’re calculated by companies like FICO and VantageScore using complex formulas called scoring models.
The following video explains a little more about how credit works:
This article has already mentioned FICO and VantageScore a few times. And with good reason. According to the CFPB, the two credit-scoring companies provide some of the most commonly used scores.
What Is FICO?
Shortened from Fair Isaac Corporation, FICO is credited with creating the first standardized scoring model. That was 1989. In the 30-plus years since, FICO has created multiple versions of its scoring models. But it says today’s models are still very similar to the original.
FICO says it has the most widely used scores in the industry, claiming they’re used in more than 90% of lending decisions in America.
What Is VantageScore?
VantageScore entered the picture in 2006, in part, to compete with FICO. It’s managed independently, but it was founded by Equifax®, Experian® and TransUnion®, the three major credit bureaus. That’s notable, because those bureaus supply the credit reports mentioned earlier, the ones often used to calculate credit scores.
And while VantageScore isn’t as widely used as FICO is, it says its scoring models are the only versions to incorporate data from each of those bureaus. And that fact, the company says, allows it to calculate scores with greater “consistency, predictability and accuracy.”
What’s a Good Credit Score Range?
A good credit range depends on where a score comes from and who’s judging it. It’s important to remember that lenders set their own credit policies and standards to determine creditworthiness. That means what FICO, VantageScore or anyone else considers good may not all be the same.
Keep that in mind as you read what might be considered a good credit score range.
What’s a Good FICO Credit Score?
When it comes to “what’s good,” FICO says scores between 670 and 739 qualify. Scores in that range, it adds, are near or slightly above the U.S. average.
What’s a Good VantageScore Credit Score?
When it comes to VantageScore, scores between 661 and 780 might be considered good.
Factors That Affect Credit Scores
So, you can see credit-scoring models and credit reports are two big factors that determine your credit score. But if you don’t know what information from your credit report is being used, it’s not much help.
Here are a few factors the CFPB says “make up a typical credit score”:
- Payment history: How well you’ve done making payments on time.
- Debt: How much current unpaid debt you have across all your accounts.
- Credit utilization: A ratio that reflects how much of your available credit you’re using compared with how much you have available. Credit utilization is usually expressed as a percentage.
- Loans: How many loans and what kinds they are, such as revolving credit accounts and installment loans. Sometimes this is called your credit mix.
- Credit age: How long you’ve had your accounts open. But remember, what qualifies as your oldest line of credit depends on what’s being shown in your credit reports.
- New credit applications: How many times you’ve applied recently for new credit. The effect on your scores might be minor, but a lot of new hard credit inquiries could still give a negative impression to lenders.
How Does FICO View Those Credit Factors?
FICO is pretty specific about what it views as the most important credit factors: Payment history makes up about 35% of its scoring. About 30% is based on the total debt. The other primary factors are credit history (15%), credit mix (10%) and new credit (10%).
How Does VantageScore View Those Credit Factors?
VantageScore doesn’t give percentages, but it is clear about what’s crucial to its scoring models: It says credit utilization is extremely influential. Credit mix and experience are highly influential. Payment history is moderately influential. And credit age and new credit are less influential.
What Is a Good Credit Score for My Age?
Your age doesn’t directly influence your credit scores. But as FICO and VantageScore show, the age of your credit accounts is one factor that affects how scores are calculated.
That could be a reason people’s credit scores tend to increase as they get older. Their accounts have simply been open longer. But credit scores can rise or fall no matter how old you are. And having good credit scores comes down to more than just your age.
Why Is a Good Credit Score Valuable?
Now you know a little about where scores come from. But that doesn’t explain why good credit scores are so valuable. Credit scores are often associated with credit card or loan applications, but their influence goes beyond that.
Good scores can affect interest rates, credit limits, housing applications and even job prospects. And they can offer more options, more bargaining power and more financial flexibility.
Pre-Approval, Pre-Qualification and Comparing Offers
For starters, you may be pre-approved or pre-qualified for more credit card offers if you have a good score. That may allow you to compare offers and find the best fit for your situation—whether you’re looking at mortgages, credit cards or auto loans. But if you’re shopping around, be sure to understand how credit inquiries can affect your credit.
Interest Rates and Credit Limits
If you’re approved for a loan or a credit card, a good credit score could mean higher credit limits, lower interest rates or both. And when you’re paying less in interest, you may have smaller payments and be able to pay off your debt faster. In general, that means that higher credit scores could decrease the cost of borrowing money.
Beyond Credit Cards and Loans
Finally, good credit scores could affect other parts of your life, too:
- Landlords may check credit scores as part of rental applications.
- Some employers perform credit checks before hiring job applicants.
- Insurers may consider credit to determine premiums.
- Cellphone providers and utilities may waive security deposits if they see good credit scores.
How to Build a Good Credit Score
- Always pay your bills on time. To meet this goal, consider setting up automatic payments or electronic reminders to help you remember payment due dates.
- Avoid your credit limit. Experts recommend keeping your credit use below 30% of your available credit—across all your credit card accounts.
- Keep an eye on your credit history. Showing responsible credit habits over a long period can help your credit scores.
- Apply only for credit you need. If you apply for multiple credit cards and loans over a short period of time, lenders may incorrectly think your financial situation has changed for the worse.
- Check your credit reports. Because your credit scores are based on the information in these reports, errors can potentially hurt your credit scores. Learn how to get free copies of your credit reports from AnnualCreditReport.com.
When it comes to monitoring your credit, CreditWise from Capital One makes it easy. It’s free for everyone—not just Capital One customers. And checking won’t hurt your score—a major plus if you’re working to improve a bad credit score—so you can check it as often as you like.
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We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many scoring models used by lenders. It likely won’t be the same model your lender uses, but it is an accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Alerts are based on changes to your TransUnion and Experian® credit reports and information we find on the dark web. The tool is not guaranteed to detect all identity theft.