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.
Why does it matter to have a good score? A high credit rating can significantly reduce your borrowing costs (including 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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Unfortunately, it is not as simple as just checking your score with any credit agency. There are many different scoring systems, and each has a different scale. New systems are introduced occasionally, and individual lenders have their own criteria and variations on scores. Even with all this variation, you can still get a good idea of where you stand by getting your credit scores from the three main credit reporting bureaus.
Note: You can also get your credit reports for free from AnnualCreditReport.com.
Credit Score Ranges: Good, Bad, and Excellent
While there are many credit scoring systems, it is generally accepted that any score above 720 (particularly on the FICO scale) is considered a GOOD credit score. To help you visualize this, here’s a rating scale (recognize that there are no official brackets; this is just an approximation of a continuous range):
|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.|
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.
The chart from Credit Karma suggests that 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.
Check Your Credit Scores for Free*
If you don’t know your credit scores yet, you can use some of the sites listed below to gain access to your credit scores.
* There is currently no free option for Equifax. You can get your score directly from Equifax for a one-time fee of $19.95.
Click the following link 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 rely heavily on credit scores to determine whether or not to loan you money. Your credit score also determines what price you’ll pay, in the form of interest charges and other fees. Typically, people with higher credit scores receive lower interest rates compared to people with lower credit scores.
|FICO® score||APR||Monthly payment|
Factors that Impact Your Credit Score
Graphic from myFICO’s About FICO scores page
Your 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 a payment? How much was it, and how long ago did it happen? Your credit score will be better if you never miss a payment.
- How much do you currently owe – Your credit score could be negatively affected if you owe too much money.
- Credit history — How long have you been using credit? The longer the better; that’s why many credit experts recommend that you do not close your credit card accounts.
- Application for credit — When was the last time you applied for a loan? Was it approved, or was your application rejected? A string of loan and/or credit card applications could raise a flag and lower your score.
- 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
You can do your best to approximate a desirable credit score, but 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, what if the bank doesn’t lend you the money?
This could mean a few things:
- The lender may be looking at a report that’s using a different system than the scoring scale you are looking at.
- Something could have changed since the last time you checked your credit scores.
- Your income is too low, or too unpredictable — e.g., you’re self-employed or a small business owner.
- Your debt-to-income ratio is too high — perhaps you have too many outstanding debt obligations.
- Your lender may have a 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.
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.