Generally speaking, the credit bureaus consider any score over 650 to be a “good” credit score. Credit scores calculated using the FICO® score or VantageScore 3.0 scoring models range from 300 to 850. For FICO® scores, a good credit score is 670 to 739 with a higher score being very good or excellent. For VantageScore 3.0 scores, a good score is from 700 to 749 with a score from 750 to 850 being excellent.
The best credit score and the highest credit score possible is 850 for both the FICO® and VantageScore models.
On the flip side, FICO® Scores below 670 are fall into the fair and poor range, while VantageScore 3.0 scores below 700 are fair, poor or bad.
Here’s how credit scores break down:
|VantageScore Credit Score||VantageScore Rating|
|FICO Score Credit Score||FICO Rating|
FICO® and VantageScore aren’t the only credit scoring models. They are though the most commonly used models and the models used by the major credit bureaus—Experian, Equifax and TransUnion. Although Experian also has its own scoring model called Experian PLUS and other models exist. Here’s a look at some of the other scoring models and the ranges they use.
- VantageScore versions 1.0 and 2.0: 501–990
- Experian’s PLUS score: 330–830
- TransUnion New Account score of: 300–850
- Equifax credit score:280–850
Some lenders even have their own models. But, most lenders and credit card companies use FICO® scores or VantageScore scores. Learn more about how VantageScore scores compare to FICO® scores.
What Do Credit Scores Mean?
The three-digit numbers called credit scores are how the scoring models break down your credit scores. That number is calculated based on the information in your credit report at a credit bureau. Each bureau has its own file and score. The file is a picture of how you’ve used credit—or not—to-date.
Your score and where it falls tells lenders and credit card issuers how likely—or unlikely—you are to pay off a loan or credit card or to default on either and how likely you are to miss payments. In other words, it tells them if you’re a good risk. It tells them whether or not they want to approve or deny you for a loan or credit card.
A poorer score doesn’t necessarily mean the lender or credit card issuer won’t give you a loan or card, but it can mean, they do so at a higher interest rate and with poorer loan terms. In other words, to offset you being a risk, they offset their risk by charging you more interest or a higher annual fee or something else.
For example, if you’re buying a $300,000 house with a 30-year fixed mortgage, and you have good credit, you can end up paying more than $94,000 less for that house over the life of the loan than if you had bad credit.2
Any given lender or credit card company might have its own definition a good credit score too. For example, one lender might approve applicants with credit scores of 680 or higher for a loan. Another might be more selective and only approve those with scores of 750 or higher. Or both lenders might offer credit to anyone with a score of at least 650, but charge consumers with scores below 700 a higher interest rate.
Scores are also used by landlords, cell phone companies and even employers to determine whether to rent to you, sell you phone service and give you a job.
Do Lenders Prefer a Good VantageScore Score over a Good FICO® Credit Score?
Lenders don’t necessarily prefer one score over the other. It is likely though that a given lender uses one score and not the other.
FICO® reports that 90% of lenders use FICO® scores when deciding whether or not to loan money to an applicant.
VantageScore, on the other hand, states that “About 10.5 billion VantageScores were used between July 2017 and June 2018, with 4.4 billion of those involving credit card issuers, according to a VantageScore Solutions market study released in 2018.” VantageScore also states that VantageScore is used by auto loan lenders, mortgage lenders, personal and installment loan lender and eight out of 10 of the largest banks.1
Advantages offered by the VantageScore for both lenders and consumers include that the VantageScore model:
- Was developed by all three credit bureaus to offer a model more consistent across all bureaus than the FICO® scoring model.
- Calculates scores for more people by giving a score to people with a shorter credit history.
And both models are consistent enough with each other that knowing where you stand in one, gives you a solid indication of your credit in general.
What Goes Into a Good Credit Score?
The same basic factors go into calculating both VantageScore credit scores and FICO® credit scores and are:
- Payment history that accounts for 35% of most scores
- Credit utilization that makes up 30% of most scores
- Length of credit history or credit age used to calculate 15% of most scores
- Mix of accounts that makes up 10% of most scores
- New credit inquiries that affects 10% of most scores
A history of late and missed payments for either scoring model lowers your credit score more than any other factor.
When determining your score, both the FICO® and VantageScore scoring model looks at how recently you missed a payment or were late, how many accounts you were late on and how many total payments on each account were missing or late.
The FICO® scoring model treats each late payment the same—assigning a single weight to all of them as a whole. The VantageScore model looks at each late payment separately, which means each late payment has an added impact on your score.
To have a good credit score, you want to have as clean a payment history as possible with few or no late payments.
Credit Utilization Ratio
Your credit utilization ratio is the amount of credit you’ve used divided by your total available credit limit. If you have credit cards with a combined credit limit of $8,000 with balances of $3,000, your credit utilization ratio is 37.5%.
Having a good credit score requires a credit utilization ratio of 30% or less and 10% is even better. To hit 10% with a combined credit limit of $8,000, your balances need to stay between $800 and $2,400.
Your credit age is not your own age, but how long you’ve used credit. More accurately, it’s the age of the oldest account, newest account and average ages of all accounts on your credit files. Say an old account was closed and fell off your file and the next oldest account is 10 years “younger” than the account that fell off, your credit files may not show how long you’ve actually used credit overall, but the age of the oldest account on file.
To have a good credit score as far as credit age requires at least one account on your credit file that is at least six months old.
Account mix is how many installment accounts and revolving accounts you have.
- Installment accounts are loans, such as mortgages, car loans or personal loans, with a fixed monthly payment for a certain term (number of months or years).
- Revolving accounts are credit cards and lines of credit with an overall credit limit that you can charge against.
Lenders want to see you can handle, and are familiar with, both types of accounts, so a good mix of the two makes for a better credit score.
Hard inquiries happen when a lender looks at your credit report because you’ve applied for credit. A hard inquiry affects your credit score—lowering it by 5 to 10 points for up to 2 years.
When shopping for an auto loan or mortgage, it’s normal to shop around to find the best rates. Depending on the scoring model used, if you do your loan shopping in a 14 to 45-day span, the inquiries can be lumped into a single inquiry and affect your score less. FICO® score models allow 30 days, while others allow 45 days. On the other hand, the VantageScore model uses only a fourteen-day span. You can ask a lender which credit scoring model it uses when you apply for a loan.
The ability to lump hard inquiries together doesn’t apply to credit cards.
Soft inquiries also occur but don’t affect your credits score.
While hard inquiries only make up 10% of your score, to maximize your score, try and minimize credit inquiries.
Is a Credit Score the Only Thing Lenders Look at?
Lenders look at more than credit scores. The score plays a large factor, but so does your full credit report—sometimes from one bureau, sometimes from all three. They may also look at your annual income and your debt-to-income ratio or overall debt.
Your debt-to-income ratio is calculated by dividing the total recurring monthly debt you have by your gross monthly income to determine the percentage of debt you have compared to your income or available money.
You want the percentage of your debt-to-income ratio to be on the lower end. Otherwise, a lender may look at a high number and immediately think you’re unable to successfully make any more monthly payments and so consider you a higher credit risk.
Credit card issuers and lenders may also look at how many reported delinquencies you have, how many hard inquiries were added to your credit file, your overall credit card utilization rate, your annual income, and the health of your credit history.
How Do I Get My Credit Scores?
You can get your full credit report from each credit bureau free once a year from AnnualCreditReports.com. Through April 2021, you can get a free copy of your credit report from each bureau weekly to help protect your financial health during the COVID-19 coronavirus pandemic. Those reports don’t include your credit score.
Most online options for viewing your credit score—free or paid—are limited to one or two scores. ExtraCredit from Credit.com takes it twenty-six steps further by offering you 28 of your FICO scores from all three major credit bureaus. When you sign up for an ExtraCredit account, you can also earn money when you get approved for select offers, monitor your accounts with $1 million identity theft insurance, and get exclusive discounts on credit repair services. All for less than $25 a month.
If you’re not ready for ExtraCredit, Credit.com’s free Credit Report Card offers you your Experian VantageScore 3.0 credit score for free for life.
What If My Credit Score Is Less than Good?
If your credit is fair or poor, find out why. You can see what’s impacting your score in your free Credit.com report card. It shows how you’re fairing in payment history, debt usage, credit age, account mix and credit inquiries. Once you know what is affecting your credit—whether one factor or multiple factors—you can address the factor and work to improve your score.
Once you get to good credit, you can keep it good by continuing to monitor the factors in your report card and taking the needed steps to keep your score healthy.
2 Assuming someone with poor credit (620–639) gets a 30-year fixed rate loan at 5.481% APR compared to someone with excellent credit (740 and above) getting a 30-year fixed rate mortgage at 4.025% APR. Interest for the borrower with poor credit would total $311,925.29. Interest for the borrower with excellent credit would total $217,166.32, a difference of $94,758.97 based on calculations made with https://www.mortgagecalculator.org/calcs/compare.php.