What is a good credit score?

When you apply for a loan or a credit card, sign a lease to rent an apartment, take out an auto or home insurance policy, or look to finance a new home or car, there’s plenty of information that lenders and landlords take into consideration. At or near the top of that list is your credit score, which is essentially a prediction of your credit behavior.

This includes how likely you are to pay back a loan on time, based on information from your credit reports. To receive the best interest rates and terms, a good credit score is a must. What is a good credit score? We’ll explain in this article, a general guide to credit scores and why it’s important to know yours.

What is a good credit score?

Most lenders and banks rely on FICO credit scores when determining how reliable a potential borrower is. For some background, FICO is known for pioneering how to calculate credit scores based on information collected by credit reporting agencies. There are other types of credit scores and models. But most lenders use FICO scores when deciding whether to offer borrowers a credit card or loan, and in figuring out what the card or loan’s rate and terms should be. Many banks use FICO scores when approving applications for checking and savings accounts as well.

Five important factors make up your credit score based on the FICO model. These include:

• Payment history (35%): This is the most important factor in your credit score. Payment history includes the payments you’ve made on all your credit accounts as well as whether those payments were made on time.
• Credit utilization (30%): Almost as important as your payment history is your credit utilization ratio, also known as a debt-to-credit ratio. This is your current credit balance compared to how much credit is available to you.
• Credit history (15%): How long you’ve maintained open credit accounts is your credit history. FICO places importance on how long that credit history is.
• Credit mix (10%): If you have a variety of credit types, you’re considered to have a good credit mix. This includes revolving credit (like a credit card) and installment loans (such as an auto or some personal loans).
• Credit applications/inquiries (10%): This covers how often you apply for new lines of credit. These are also known as credit inquiries, which fall into two categories–hard and soft. A hard credit inquiry is usually made by a lender when someone applies for a credit card, mortgage, or car loan. Hard inquiries can affect a person’s credit score if they’re made too often. Soft credit inquiries are usually made when screening for pre-approval offers or with background checks. Your credit score is not impacted by a soft credit inquiry.

FICO credit scores range from 300 to 850. Below is a breakdown of poor/fair, good, and very good/excellent credit scores and how they may impact you.

Poor to fair credit scores: 300-669

On the FICO scale, a score between 300 and 579 is considered poor; a score between 580 and 669 is deemed fair.

A poor to fair credit score could be the result of a mix of factors, including missed or late payments, defaulting on a loan (not paying it back), the lack of a sustained credit history, and too many applications for credit. Having a credit score in the 300 to 579 range is not ideal because it can impact the access you have to several borrowing options. For example, if a lender or credit card issuer reviews your application and sees a credit score in this range, they may either deny you the credit card or loan, or they may approve it…but with very high APRs and interest rates.

Why? Because a lender or credit card issuer must determine the risk involved in giving money or a credit card to a person with a history of not paying their bills or who doesn’t have much of a credit history. If the risk factor is high, they’ll want to be sure they’re compensated for any potential loss of money by assigning a high APR or interest rate to the loan or card.

If your FICO score falls into this range, don’t worry! Credit scores can be repaired. By paying your bills on time, paying off your loans each month, establishing a solid mix of credit accounts, and not applying for too many lines of credit, your FICO score will gradually increase. That means you’ll be eligible for better loan and credit card terms. Be sure to monitor your credit score–you can check it for free on websites like Experian, Equifax, Credit Karma, annualcreditreport.com, and freecreditscore.com.

Good credit scores: 670-739

On the FICO scale, a score between 670 and 739 is considered good. This means that, while your credit has room to improve, you still have a solid credit record.

If you’re in this credit score range, you generally have a good payment history, though you may have missed a payment or two or been late a couple of times. In this range, your credit mix and history are probably pretty good. With a good credit score, you should be able to receive favorable loan and credit card terms and rates–but not the best. That means you’re potentially saving a lot of money on loans and interest over those with poor to fair credit scores. You’re also likely to pay more in interest than those with very good or excellent scores.

Not a problem though! You’re already on solid ground, credit-wise. Continue making on-time monthly payments and consider broadening your credit mix to bring that “good” credit score into “very good” range.

Very good to excellent scores: 740-850

If your credit score falls within the 740 to 850 range, congratulations! With a very good (741 to 799) or excellent (800 to 850) FICO credit score, you are likely to qualify for the best possible rates offered by lenders and banks, because they love doing business with folks they know are on time with their payments and have demonstrated that they are little to no risk as customers.

This is a major benefit for you also, because you could save thousands of dollars in interest by securing a low interest rate when compared to other borrowers. With a very good or excellent credit score, you’re in great position when it comes time to buy a house, finance a vehicle, take out a loan, or open a new credit card account.

Our advice? Keep doing what you’re doing! Continue paying your bills on time, ensure your credit mix remains diversified, and keep managing your debt. Just remember to keep an eye on your credit score from time to time, because you definitely want to maintain the range you’re currently in.

What credit score do I need?

Technically, you don’t “need” any particular score. The general rule on FICO credit scores is the higher, the better. Having a poor or fair credit score won’t necessarily prevent you from purchasing what you want or taking out a loan. But the process will probably be more challenging and you’ll wind up paying more in interest.

If you want to improve your credit score, the best approach to take before making a major purchase or taking out a loan is to build up your score–primarily by paying your bills on time. Once you establish a pattern of financial reliability and responsibility, your score will start to rise. That will make it easier and cheaper for you to do quite a few things, such as:

1. Borrowing money. As we mentioned earlier, the better credit score you have, the lower your interest rates will be when it comes time to take out a loan, buy a house, finance a car purchase, and even open a new business. Banks and lenders offer the lowest rates to borrowers opening new lines of credit when their credit scores are high. If your score is in the poor to good range, you may still be able to take out a loan–it will just cost you more to do so.

Example: If you’re applying for a mortgage, having a very good to excellent credit score could save you up to 1% in interest. For a 30-year mortgage on a $300,000 house, that means savings of at least $200 per month. That adds up to very significant money.

2. Renting an apartment. A minimum credit score of 620 (in the “fair” range) is usually required to qualify for renting an apartment, according to Experian. However, property managers and landlords can usually set their own minimum requirements when it comes to a potential renter’s credit score. Some demand a 700 or higher credit score. So, again, the higher your credit score, the easier it will be for you to rent an apartment. Additionally, with a high credit score, a landlord or property manager is less likely to require you to put down a large security deposit in advance or have someone else co-sign the lease.

3. Getting a 0% or low-APR credit card. Many credit card issuers offer new customers special promotions such as 0% APR for a certain amount of months…if you have a good credit score. If you do, take advantage of offers like these, which can save you a lot of money in monthly interest for a year or two.

4. Attract the best offers. Lenders and credit card issuers will find you if you have very good credit–and they’ll make you some of the best offers you can find because they know you’re a trustworthy borrower. These offers can really help when it comes time to take out a loan, refinance for a lower interest on any debt you may have, and get an upgraded credit card with lower rates and better perks.

So, while it is difficult to define a specific credit score that you “need,” the best rule to follow is to try and improve your credit as much as possible so you can take advantage of lower rates and better terms. If you’re in the “poor” range, try to improve that to “fair.” If your credit score is “fair,” take the proper steps toward getting it into the “good” range.

What is a good credit score to buy a house?

If you’re looking to buy a house, lenders usually look for a borrower’s FICO credit score to fall within the 600 to 850 range. That range spans “fair” to “excellent” borrowers, so there is plenty of opportunity for borrowers who don’t have the best credit score. Remember that all lenders are different, so some may be looking for higher credit scores than others. The required credit score may also depend on the type of mortgage loan you’re applying for.

What is a good credit score to rent an apartment?

We covered this in the previous section, but it’s worth repeating…most landlords and property management companies look for at least a 620 credit score (“fair” range) when considering applicants for their apartments. Again, the higher your credit score, the easier it will be for you to rent an apartment.

What is a good credit score to buy a car?

Like other loans, this will depend on the specific lender, the type of car loan you’re seeking, and other factors. But, similar to renting an apartment, buying a car usually requires at least a “fair” credit score, starting around 600.

If your credit doesn’t fall within a lender’s or landlord’s requested range, don’t get discouraged! Having a lower credit score, while not ideal, may not prevent you from owning a home, renting an apartment, or buying a car, which is great news! But if your credit is in the lower ranges, it’s important to be prepared for higher interest rates and larger down payments. It’s not personal; lenders just want to be sure their best interests are covered in case payments can’t be made. As with any major purchase, we recommend comparing rates and loan offers, considering pre-approval options, and shopping around until you find the terms that work for you.

What is a good credit score for my age?

The answer to this question is…well, there really isn’t an answer! That’s because credit scores can differ quite dramatically across age groups. While it may be assumed–and even proven in the chart below–that older people are more responsible and reliable with their finances, that’s not always the case. There are plenty of people in their 60s or 70s who are far less responsible with their money than some adults in their 20s.

Fortunately, credit scores are not tied to age groups. Instead, they’re determined by each individual’s history and money habits. Those who have shown reliability and responsibility will be rewarded for their good financial habits, regardless of age. Interestingly enough, the average FICO credit scores (as of 2023) increase by age of generation.

How can I improve my credit score?

If your credit score isn’t where you want it to be, there are plenty of ways to improve it.

• Pay all your bills on time. Remember, payment history is the most important factor in your credit score!
• Cut down on your credit card balances.
• Pay off your debts.
• Keep some older accounts you may not use often (such as credit cards) open to stretch your credit history.
• Try to limit your credit utilization ratio for each credit card you have. Credit utilization ratio  is the percentage of your total available credit that you’re currently using–this includes everything that you owe on your credit cards and other revolving lines of credit.
• Pay regular attention to your credit report to catch any possible errors and to make sure your credit score is where you need it to be.

The benefits of a good credit score

Great credit scores don’t happen overnight. It takes time and positive financial behavior to establish, build, and keep a good credit score. Now that you know what you need to do to improve or maintain your credit score, start practicing those good financial habits by using the steps listed above. Once you’ve elevated your credit score to where you want it, you’ll quickly realize how many benefits there are to being a reliable and trustworthy borrower, and you’ll want to take full advantage of those benefits!