What is a Good Credit Score?
In general, anything above 700 is considered good, but it’s not that simple. There are many different credit scoring systems with different scales — not to mention individual lenders have their own criteria. In short, a good credit score depends on the scoring system used and your particular lender. However, you can get a good idea of where you stand by getting your credit score and report.
If you don’t know your credit score yet, lets get them now before we continue.
| Score | Get from | Cost |
|---|---|---|
| FICO | MyFICO.com | Free with credit monitoring trial |
| TransUnion | Credit Karma | Free |
| Experian | Quizzle | Free |
| All three | CreditReport.com | Free with credit monitoring trial |
* After accessing your credit score, you have to cancel the trial to avoid being charged for the service.
Credit Score Basics
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 (credit worthiness).
Overall, your credit score does 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 the rates for people with lower credit score.
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:
| FICO® score | APR | Monthly payment |
|---|---|---|
| 760-850 | 4.994% | $1,609 |
| 700-759 | 5.216% | $1,650 |
| 680-699 | 5.393% | $1,683 |
| 660-679 | 5.607% | $1,724 |
| 640-659 | 6.037% | $1,806 |
| 620-639 | 6.583% | $1,913 |
What is a Good Credit Score?
While there are many credit scoring systems, it is generally accepted that FICO scores above 700 is considered a good credit score. However, there is no standardization 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 for a high interest rate despite your good credit score? This could mean a few things:
- The lender may be looking at a report that’s using a different credit scoring system than yours,
- Something could’ve changed since you last acquired your credit score, and
- 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.
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credit scoring systems, credit score, credit report, high interest rate, free credit scores, FICORecommended articles
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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.
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.
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.
@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.
I have been trying to get my credit score higher in order to get a decent mortgage. What really helped me was the advice this guy at http://www.slickbudget.com/creditscores.html gave in his credit score section. I followed his tricks and my score jumped up into the 700’s in under 60 days. It is definitely an interesting read from an insider to say the least.
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…