What Is a Good Credit Score?

You might know your number, but here’s how to interpret your credit score and how good it really is.

Banks and loan companies typically don’t know you personally and have no way of knowing how likely you are to pay back a loan on time. So to determine whether you’re a worthy candidate for a loan, potential lenders rely on your credit score, which indicates how likely you are to default on the loan. Learn what’s considered a “good” credit score so you can improve your score if needed before you apply for a credit card or loan.

Credit Score Scale: What Is a Good FICO Score?

A good credit score can unlock better terms and rates for borrowers. Review the credit score scale to better understand what your score means for your borrowing options:

Credit Score Scale
Score Rating Indication
800+ Exceptional FICO credit score Borrower might have a very easy approval process.
740-799 Very good FICO credit score Consumers might qualify for better interest rates from lenders.
670-739 Good FICO credit score This is the median FICO score range; consumers in this range are considered acceptable borrowers.
580-669 Fair FICO credit score Consumers are considered subprime borrowers; interest rates might be higher for these consumers.
579 and lower Very poor FICO credit score Consumers in this range are considered to have a bad credit score and might be denied loans or be required to put down deposits or collateral.
Source: Experian
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What Is the Highest Credit Score?

FICO credit scores range from the lowest score of 300 to the highest score of 850; there are different tiers of credit scores and the higher your score, the better your credit. A FICO score over 800 will open doors for you at just about every lender because only about 1 percent of people with these scores are likely to become delinquent. A score of 740 or above is also great because the delinquency risk is only about 2 percent, so lenders are still willing to give preferred interest rates.

Average scores fall between 670 and 739. Although a score in that range won’t make your application stand out based on your credit score alone, and you might not get the best interest rate offers, you’re still considered an acceptable borrower. But, dip below 670, and you’re likely to pay higher interest rates and, if you’re under 580, have a hard time getting approved for loans.

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But even if you have bad credit, credit card options are still available to you. Credit cards available to people with credit that’s not great include:

  • Capital One Secured MasterCard
  • Discover it Secured Credit Card
  • U.S. Bank Secured Visa Card

According to the Fair Isaac Corporation, 90 percent of top lenders use a FICO credit score when making lending decisions. However, there are over 60 different FICO credit scores, which can be used for different lending purposes. In addition, there are other credit scoring models that lenders can use, such as the VantageScore. So make sure you know which score your lender is looking at.

Learn: 7 Surprising Ways You’re Hurting Your Credit Score

What Affects Your Credit Score?

According to the Fair Isaac Corporation, the company that created the FICO credit scoring algorithm, these are the factors that affect your credit score:

  • Payment history: 35 percent
  • Amounts owed: 30 percent
  • Length of credit history: 15 percent
  • New credit applied for recently: 10 percent
  • Types of credit used: 10 percent
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These percentages are just estimates, rather than a hard and fast rule. How each factor is calculated depends on your particular credit report, based on the information provided to the credit bureau calculating your score.

Find Out: How It’s Possible to Have Perfect Payment History and Bad Credit

Other Factors Lenders Consider

A good credit score is a great start, but it’s not all that lenders consider when deciding whether to give you a loan. Your credit score specifically doesn’t take into consideration a number of factors that lenders think are important, such as your income and employment history.

Financial institutions want to see your employment history when you’re applying for a loan — people with stable employment histories pose lower risk. If you’re self-employed, you’re likely to need to submit additional documentation verifying your income.

Banks examine your debt-to-income ratio to make sure that you can afford the repayments. For example, even if you have a perfect credit score, but you make $3,000 per month, no lender will give you a mortgage with a $4,000 monthly payment or a credit card with a limit of $50,000.

Tips to Improve Your Credit Score

If your credit score isn’t where you want it to be, don’t despair — you can improve it. First, pull your credit report from each of the three major credit bureaus: TransUnion, Equifax and Experian. Check for errors, such as accounts that don’t belong to you, or payments marked as late that you made on time. You should also make an effort to make at least the minimum payment on time going forward and to keep your balances lower as your budget allows. Finally, don’t apply for any new credit unless you need it.

Up Next: Your Game Plan for Getting the Highest Credit Score Possible

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About the Author

Michael Keenan

Michael Keenan is a writer based in the Kansas City area, specializing in personal finance, taxation, and business topics. He has been writing since 2009 and has been published by Quicken, TurboTax and The Motley Fool.

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What Is a Good Credit Score?
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