What number is considered a good credit score rating? On a scale that usually goes from 300 to 850, the short answer is anything above 720. And why does it matter to have a good score? Simply put, a high credit rating can significantly reduce your borrowing costs (i.e., the interest rate you have to pay the lenders) — even if you don’t plan to borrow money, having a good credit score can benefit you in many ways.
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However, it is not that simple because there are many different scoring systems with different scales and with new systems introduced occasionally — not to mention individual lenders have their own criteria. However, you can get a good idea of where you stand by getting your credit scores from the three main credit reporting bureaus listed below.
Note: You can also get your credit reports for free from AnnualCreditReport.com.
If you don’t know your credit scores yet, you can check out some of these sites below to gain access to your credit scores.
* There is currently no completely free option for Equifax. You can enroll in GoFreeCredit credit monitoring trial (regularly $16.95 per month) to get your credit score; and if you choose not to continue, you can cancel your membership. Or you can get your score directly from Equifax for a one-time fee of $19.95. Click here for more information on how to get your credit scores for free.
While there are many credit scoring systems, it is generally accepted that any score above 720 is considered a GOOD credit score. To help you visualize this, here’s a rating scale (it’s important to recognize that there is no official brackets and this is just an approximation of a continuous range):
| Credit Score | Description |
|---|---|
| 750+ | Excellent credit score. You should qualify for the best interest rate and loan terms. |
| 700 – 750 | Good credit score. There won’t be any problem in getting a loan at a good interest rate. |
| 640 – 700 | Average credit score. You may qualify for the loan but not at a good interest rate. |
| 580 – 640 | Poor credit score. You will have a tough time getting a loan or a credit card. |
| below 580 | Bad credit score. It’s doubtful that you will qualify for a loan or a credit card. |
To help you get a better idea, the image above is a scale from Credit Sesame. According to Credit Sesame, a GOOD credit score rating ranges from 680-739 and an EXCELLENT credit score is anything above 740.
Here is a chart from Credit Karma. According to Credit Karma, a GOOD credit score is generally between 700 and 750.
Here is an older image from the now retired Equifax Credit Score Card™. According to Equifax, a GOOD credit score rating ranges from 725-759 and an EXCELLENT credit score is anything above 760.
Overall, your scores do a very good job of predicting how likely you are to repay your debt. Therefore, lenders extensively use credit scores to determine whether or not to loan you the money and at what price (i.e., interest rate). Typically, people with higher credit scores get lower interest rates compared to people with lower credit scores.
To give you an idea on how credit score affects interest rate, here’s an example of 30-year mortgage interest rate for a $300,000 loan from myFICO web site (data as of May 9, 2013:
| FICO® score | APR | Monthly payment |
|---|---|---|
| 760-850 | 3.034% | $1,270 |
| 700-759 | 3.256% | $1,307 |
| 680-699 | 3.433% | $1,336 |
| 660-679 | 3.647% | $1,372 |
| 640-659 | 4.077% | $1,446 |
| 620-639 | 4.623% | $1,542 |
Graphic from myFICO’s About FICO scores page
In general, credit score is a number generated by a mathematical formula. This formula analyzes information in your credit report to derive your credit score — a number ranging from 300 to 850. Your credit score is a reflection of your credibility (creditworthiness). Here are some of the key factors that affect your credit score rating:
However, there is no standard that dictates what a good score is. As such, it’s possible that you may be surprised by the interest rate offered on your next loan. What happens if your lender asks you to pay a high interest rate despite your good credit, or worse, doesn’t lend you the money?
This could mean a few things:
When this happens, you might consider working with another lender or delay your loan application to give yourself time to improve your credit score.
| Credit Score | Description |
|---|---|
| 750+ | Excellent |
| 700 - 750 | Good |
| 640 - 700 | Average |
| 580 - 640 | Poor |
| below 580 | Bad |
Hi Pinyo! You make a good point about credit scores being relative – how “good” your credit score depends on the scoring model, the scale of the scoring model and what other criteria your lender or creditor is using to decide if you’re credit-worthy. For instance, in the home loan world, 720 is generally considered the gold standard; if you have a credit score of 720 or above, you’ll usually qualify for the best interest rates and terms. That said, there are a lot of other things that lenders take into consideration — for instance, assets or your debt-to-income ratio. All these things play a role in what rate and terms you’ll qualify for.
It’s so important to manage your credit these days — it’s essentially your financial ID card. Heck, even Google is taking notice and serving up specific ads based on web users credit scores. To find out where you stand, check your credit report and score periodically. You can get a free credit report AND score at Quizzle.com.
@Ann-Marie – Thank you for your great comment. I checked out Quizzle.com. Excellent site. In fact, there should be a post about it on GoodFinancialCents.com in a few days.
Actually, I find it very ironic, that in order to build a “credit”, one has to go in “debt” first and pay it. But that is way system is set up.
I’m with zengirl….it seems so silly the way it is set up. It took me forever to build up any kind of credit score because I wasn’t willing to go into debt over things I could afford, or could afford if I saved.
Another contributing factor to your credit score is how much credit you have available vs. how much you are currently using. For example, if you have a $5000 line of credit but are using $4800 of it, that reflects on you poorly. If you’re making your payments on time etc. etc. that helps, but it still doesn’t fix the situation.
We had great credit scores when we graduated from college because both my husband and I put EVERYTHING on our Discover cards and paid them in full each month. Result? We got cash back–a TINY amount, granted, when the average bill was around $30 during the school year except when we had to buy books each semester, but it was something.
You don’t have to carry debt to get good credit scores!
I followed the rules and my credit score is now at 815. However i still got rejected for a loan. Im confused in how it works. does it take time for the banks to get a clear score or will it be the same as what i have been told?
It would be nice if all bureaus, organisations and credit agencies used one pre-agreed ratings scale. That way everyone would know where they are. The way credit ratings are set up at the moment is just confusing for everyone imo…
Having a good credit score to get a loan is BS. I had an excellent credit score but still couldn’t get a loan even though I’ve never been late with any payments or with my rent.
I was paying $1000 in rent and the monthly payments for the loan would have been $700. Since I would no longer have been renting but paying off the loan instead-which is $300 less than the rent I was paying…how the hell are they going to tell me that I don’t make enough money? I’m self employed and write things off as told to do so by my accountant-as any good self employed person would. But they want to use that against me although I’ve been in business for myself for 14 years and have an excellent credit score.
It’s all BS.
Your credit score means nothing. Banks are very bias and prejudice against self employed people. It makes me sick.
@Nesquick – I understand your frustration. Lenders got a lot tougher since the financial crisis, and being a self-employed person definitely doesn’t help. Having a good credit score is just one factor, your income and debt-to-income ratio are also very important.
The best thing to do is shop around a bit and see if you can find a lender that’s self-employed friendly.
Hi Pinyo,
Thanks for the informative post. I was aware of the free score at CreditKarma, but I never heard of Quizzle until now. I’ll go ahead and give it a try.
About how soon does your credit score rise once you attempt to make progress in paying your debt.
@Alex – it really depends. For example, if you have bankruptcy or tax lien on your record, your score could stay low for a decade. However, if you have high debt-to-income ratio and you suddenly pay off most of your debt, your score could go up quickly…within months. Or perhaps you get your credit report and correct inaccuracies, this too could change your score quickly.
Does getting your credit score form Quizzle or other free sites effect your credit score? I know that if a creditor pulls your credit in regards to a loan application, your score goes down.
@John – I use both Quizzle and Credit Karma to get my free scores. As far as I know, these credit pulls do not hurt your scores.
While the article is excellent, I must admit, the word good is relative. Each institution have their own grading system to rank who get a loan and while a score is important, your credit history and activity plays a very important role. You can be bankrupt and still get a 700 credit score its a matter of how you use your credit history that matters.
So my current score is 680, 685 and 699. I have 10k student loan, 17k car loan, and 4.5k personal loan. I paid the car and personal loan off. It boosted my credit score to 685, 892 and 705.
Obviously, paying off 66% of my debt didn’t make any differences whatsoever. Soon, I’ll pay off my 10K student loan in a couple of months and won’t ever need any loan ever again. Stay out of loan, banks need us, we don’t need them.
Some times whether the loan get approve or not can actually depends on the economic status, the loan officer that you deal with, the documents that you submit and many other factors.
If you can’t get approve for a loan, try to seek for a loan consultant to see whats going wrong with your credit rating.
One thing that’s vital to your credit score than people often forget is that fact that canceling your old credit cards can actually hurt your score! Once canceled, you lose all the years of good reporting that garnered your good score, but if you had a bad score, it ain’t going anywhere! Crazy, right?
Hi All,
This is a very helpful post. Thanks for posting it.
I explain my situation as I see nobody here has asked before.
I am a spanish guy, 30 y.o., who has just been trasnfered form a spanish bank to work in the States. I have received today my first credit card ever.
I would like to know how long is going to take in order to build a good credit. While I am building my credit my credit is bad or I do not have any credit?
Actually I think I do not need any credit. No loan student needed, I would buy computer/car with cash,… Overall, I only need credit score for renting apartments.
Thank you for your help,
Monti
If you are just starting out to build a good credit rating, the best thing to do is buy something not expensive with a six month payout. Make all payments on time and I do not mean on the last day. After that just keep doing that until you can get a credit card without any monthly fees. Three crdit cards, one from each of the big three. Do not put anything on a credit card that you can not pay off when due. The longer you have a credit card the higher your credit score. Also the lower amount you spend on that card compared to the maximum you can spend also increases your score. Credit is not built in a day or even a year.
It really doesn’t much matter, in my experience. Last Friday I got my FICOs from TransUnion and Equifax. (I was wanting to get a major credit card as I currently only have a store card). My TU score was 757 and my EQ was 763. I thought great it should be no problem. WRONG! I applied for an AMEX Blue, and a Citi Rewards Visa. Citi declined me first, stating that the reason was because I had no revolving accounts with a balance. Okkkkkkkkk that’s what I get for not carrying a balance. Amex declined me for other reasons but in their decision it said basically they did not see me as a customer who would spend enough to be worth it to them, essentially.
So to be honest your credit score really doesn’t mean jack. They’ll find some other reason to stick it to you, just give them the chance. I did get approved for a subprime card with a 39 dollar fee and a 500 dollar limit, whoo hoo, I’m thinking of paying the 39 bucks closing it and to hell with this stuff anyway. What good is a card like that I have to spend no more than 45 dollars at any time in my billing period or my score gets dinged, not that it really seems to matter anyway….but, I’m sure you get the point, it’s pretty worthless.
And now that I’ve got 3 inquiries, even if there was someone who would have issued a decent card to a loser deadbeat like me, they won’t now, but I’ve reached the point that I figure the hell with it anyway. I’m thinking of just sticking with my debit card, only having auto loans and staying away from the whole racket. Why make these people richer, besides they can always get ANOTHER bailout anyway.
By now most people do know that poor credit rating can limit your credit options. A common sign that you have a bad credit is when you apply for one and get turned down. This leaves marks on your credit file and having additional ones like these can make matters worse for you credit wise. If this reflects your present credit rating then your option is to avail of loans through sub-prime markets where you would be charged with higher interest rates since the lender will perceive you as a credit risk. There are ways to improve your credit rating.
Ensure that your debts are registered to your correct name and current address. Look for errors such as payments that were already made and yet are not reflected on your credit report. Ask lenders for a rate rather than credit search. You need to show lenders that you can be a responsible borrower.
Stick to spending only what is available. You need to do this for six months so that lenders can see the change in your credit history. What lenders love to see on application forms are fixed land phone lines, long term employment history, long term residence in one place and long term record with the same bank.
it’s essentially your financial ID card. Heck, even Google is taking notice and serving up specific ads based on web users credit scores. To find out where you stand, check your credit report and score periodically.
One thing that you should do is never charge more than 30% of your available credit limit. This will hurt your credit score even if you pay off your credit cards every month. Never go over that percentage.
That’s why I always advise people to increase their credit limits to the max…it’s actually better for your credit score.
Just don’t go using it!
I would advise people to avoid having too many credit cards, and if you have to take out a new one you should always wait a few months before taking out any loans, as it takes this much time for your score to bounce back to the usual number and reach a good credit score.
The credit scores are not FICO scores, these are made-up scores by the “credit reporting agencies” and are different for each one. My advice is to shred all credit cards, go to a local bank for your home loan and pay your house off as soon as possible,and pay cash for used cars, new ones depreciate the minute you sign the papers. The sooner the “credit reporting agencies” go out of business the better. The credit industry is a racket and like all rackets is soon run by shady characters. Have them take your name and address off of the history after 10 years, as it is illegal to keep it on. The less credit one has, the better.
We’ve been shopping for a house and have recently learned how hard it is to get a loan being self-employed. We had to get a co-signer which meant paying mortgage insurance, but we still got a good interest rate. One thing I’ve learned for those self employed is to set your business up to where you are considered an employee, you can use an S-corp. Pay yourself a reasonable salary instead of varying amounts each month and at the end of the year your wages are reported on a w-2. By doing so you show a steady income and though you own the company you are it’s employee on paper. W-2′s make the loan process seemingly easier to prove income. There is more paper work involved, but a good accounting program like quickbooks online with payroll has helped our small business run smoothly. And a good credit score has also been invaluable.
I have 2 questions:
1. I gave my social when signing the Lease for my Rented Apt. Will it affect my Credit Score if I move into new Apartment, breaking the lease but not paying the breaking charges.
2. If I subscribe for a creadit card, enjoy their introductory cashback offer (say $500 cash back after 3 month use) and then cancel the card after 4 months, how much will I have to compromise.
Thanks in advance
@Brian – We went through the same situation, e.g., new job and self-employment income. Yes, it was tough to get a home loan even with excellent credit.
@xplosion79 – I don’t know the full extent of your situation, but breaking a lease without paying a fee is unethical. Anyway, the landlord is unlikely to do anything that could affect your credit score, but they could file legal claim against you.
As for the credit card, you could do that and it won’t affect your credit score all that much.