What is a Good Credit Score Rating?

By Pinyo, on January 10, 2012

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 credit score? Simply put, a high credit rating can significantly reduce your borrowing cost (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.

However, it is not that simple because there are many different credit 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 and reports from the three main credit reporting bureaus.

Credit Score Ranges: Good, Bad, and Excellent

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 credit score rating scale (it’s important to recognize that there is no official brackets and this is just an approximation of a continuous range):

To help you get a better idea, here 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 considered to be 720 or higher.

Here is a chart from 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.

Check Your Credit Scores for Free

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.

FREE from Credit Sesame

FREE from Credit Karma

FREE from Equifax Credit Score Card™*

Click here for more information on how to get your credit scores for free.

How Your Credit Worthiness Affects Your Borrowing Costs

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 (note this chart has older data, but it does demonstrate how your credit scores affect your mortgage rate):

Factors that Impact Your Credit Score

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:

• Payment history – Did you miss any payment, how much was it, and how long ago. Your credit scores will be better if you never miss a payment.
• How much you currently owe – Your credit scores could be negatively affected if you owe too much money.
• Credit history — How long have you been using your credit? The longer the better, that’s why many people recommend that you do not close your credit card accounts.
• Application for credit — When was the last time you applied for a loan and was it approved or not? A string of loan and/or credit card applications could raise a flag and lower your scores.
• Credit mix — A good variety of loans generally helps your scores — e.g., home loan, car loan, student loan, business loan, and credit cards.

Good Credit Score Alone is Not Enough

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 scores, or worse, doesn’t lend you the money?

This could mean a few things:

1. The lender may be looking at a report that’s using a different credit scoring system than yours.
2. Something could have changed since the last time you check your credit scores.
3. Your income is too low, or too unpredictable — e.g., you’re self-employed or a small business owner.
4. Your debt-to-income ratio is too high — i.e., you have too many outstanding debt obligations.
5. Your lender may have very strict lending guideline.

When this happens, you might consider working with another lender or delay your loan application to give yourself time to improve your credit score.

Reviewed and updated January 10, 2012.

Do you know your credit scores? Get instant access to your 3 credit scores with a 7-day free credit monitoring trial: click here for details.

Pinyo is the owner of Moolanomy Personal Finance and an entrepreneur with over 20 years of business experience. He is interested in business management, investing and wealth management. He has written for many online publications, including American Express Currency and U.S. News Money. You can follow him on Facebook and Twitter.

Add Your Question or Comment (27 Comments)

1. Ann-Marie:

   July 28, 2009 at 5:58 pm

   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.
2. Zengirl:

   July 29, 2009 at 9:06 am

   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.
3. Gordon:

   July 29, 2009 at 3:14 pm

   You need to have a grasp of what is a good score, because then only you will be able to realize how creditworthy you are.
4. Pinyo:

   July 29, 2009 at 6:17 pm

   @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.

   @Zengirl – I know, but that’s how it work.
5. stacefraz:

   January 18, 2010 at 4:22 pm

   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?
6. Joe:

   February 3, 2010 at 4:54 pm

   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…
7. Nesquick:

   April 16, 2010 at 1:49 pm

   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.
8. Pinyo:

   April 18, 2010 at 11:15 pm

   @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.
9. Darren:

   April 22, 2010 at 3:15 pm

   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.
10. Alex:

    April 23, 2010 at 9:43 am

    About how soon does your credit score rise once you attempt to make progress in paying your debt.
11. Pinyo:

    April 24, 2010 at 9:57 am

    @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.
12. John:

    December 7, 2010 at 12:13 pm

    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.
13. Pinyo:

    December 8, 2010 at 9:58 am

    @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.
14. Krist:

    January 6, 2011 at 10:07 pm

    Pinyo- I recently got on line and got my credit scores. Trans Union shows me with an 896 with a range of 501 to 990 and experian shows me with an 883 with the same 501 to 990 range. FICO score goes from 300 to 850. What’s correct? I haven’t checked Equifax yet.
15. Nigel W.:

    February 15, 2011 at 12:58 pm

    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.
16. Lame:

    February 21, 2011 at 4:36 pm

    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.
17. jessica:

    February 24, 2011 at 11:28 pm

    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.
18. Edward O'Brien:

    March 11, 2011 at 5:36 pm

    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?
19. Monti:

    March 16, 2011 at 2:28 pm

    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
20. Lawrence N. Grossman:

    April 5, 2011 at 8:07 pm

    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.
21. Not a fool:

    April 27, 2011 at 10:42 pm

    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.
22. Garen:

    May 5, 2011 at 1:37 am

    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.
23. Mark:

    August 21, 2011 at 2:46 pm

    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.
24. Bernard:

    September 1, 2011 at 9:06 am

    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!
25. Ron:

    October 11, 2011 at 12:31 pm

    Great chart Pinyo, this is the first time I have actually seen the info laid out as a chart.
26. Shana:

    November 8, 2011 at 7:11 pm

    Great article. A good credit score can make a world of difference for so many things.

    However, some simple things that many people overlook or simply do not know can mess up their credit or keep them from getting a better score than they currently have.
27. Jason:

    December 15, 2011 at 10:49 am

    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.