A good credit score typically ranges between 680 and 750. Consumers who fall within this spectrum tend to qualify for excellent interest rates, credit cards and loans. However, what constitutes a good credit score is far more nuanced. In reality, the range of scores will depend on both the exact credit scoring model being used and its purpose.
- What's A Good Credit Score?
- What's A Good Credit Score For My Age?
- How To Improve Your Credit Standing?
Generally, a credit score above 720 can be considered good – no matter the application. Your age, what type of loan you're applying for, and your past credit history are just some of the factors that can influence the terms you'll be afforded. Ultimately, these are the things that determine what constitutes a 'good credit score'. The 720 number mentioned above will generally allow you to qualify for top-of-the-line credit cards and low interest rates across a number of banks and vendors.
|Credit Score Range||Rating||Percent of Population|
|800 - 850||Excellent||18.4%|
|750 - 799||Very Good||18.8%|
|700 - 749||Good||16.2%|
|650 - 699||Average||12.2%|
|600 - 649||Poor||10.1%|
|550 - 599||Very Poor||9.9%|
It’s important to understand lenders care much more about your credit history rather than just your credit score. The three-digit number is usually just a quick filter used to handle large volumes of applications. Beyond that, the items contained in your credit history will play a role in determining your credit worthiness. For example, having a credit score of 740 is good for anyone looking for a credit card. However, you may not qualify for certain credit cards if your oldest credit account is just 12 months old.
A good credit score for a home loan is one that will qualify you for the lowest interest rates possible. Different financial institutions will have varying credit score range cut-offs for different APRs. The Federal Deposit Insurance Corporation (FDIC) showed how credit score ranges can affect a sample $250k/30 year mortgage. A good score for a mortgage in this example would fall between 700 and 759.
|FICO Score||Mortgage APR||Monthly Payment||Total Interest Paid Over Lifetime|
|760 - 850 (Excellent)||4.36%||$1,256||$202,160|
|700 - 759 (Good)||4.58%||$1,279||$210,440|
|680 - 699 (Average)||4.76%||$1,305||$219,800|
|660 - 679 (Poor)||4.95%||$1,338||$231,680|
|640 - 659 (Bad)||5.40%||$1,404||$255,440|
|< 639 (Very Bad)||5.94%||$1,491||$286,760|
Mortgage companies use different credit score models to determine your rates – FICO Score 2, FICO Score 4 and FICO score 5. For the most part, these models are powered by similar factors including payment history, length of credit history, and your current debt obligations.
Most lenders will not provide a mortgage to homebuyer whose credit score is below 620. The only exceptions are FHA loans which are insured by the Federal Housing Administration. If the borrower defaults on a loan of this type, the government protects the borrower against the damages. Note that people whose credit score ranges between 500 and 579 typically need to make a down payment of at least 10%.
Individuals with good credit scores can also qualify for FHA loans if they wish to lower their interest rates.
When determining the interest rates for an auto loan, financial institutions typically rely on FICO® Auto Score 2, 4, 5, or 8. These scores range between 250 and 900. The higher the number the better the score. If you’re shooting for the lowest possible APR on your auto loan your Auto credit score should be above 740.
We sampled auto loan interest rates from Unitus Community Credit Union to see how interest varied on a new car loan across a range of credit scores. The results can be seen in the table below.
|New Auto Loans: Model Years 2014 and Newer|
|Credit Score||APR on 36 Month Loan||APR on 60 Month Loan||APR on 66 Month Loan||APR on 75 Month Loan||APR on 84 Month Loan|
|700 - 739 (Good)||2.49%||2.99%||3.24%||3.49%||3.74%|
|660 - 699 (Average)||3.74%||4.24%||4.49%||4.74%||4.99%|
|610 - 659 (Poor)||7.99%||8.49%||8.74%||8.99%||9.24%|
|560 - 609 (Bad)||13.24%||13.74%||13.99%||14.24%||N/A|
|< 559 (Very Bad)||14.24%||14.74%||14.99%||15.24%||N/A|
As with mortgages, the length of the loan also plays a huge impact in your rates. The longer the term on your auto loan, the higher interest you'll pay. Having a good credit score can mitigate this negative effect.
Credit scores vary widely by age. Typically, the younger an individual is, the lower their credit score is expected to be. For a college student, having a credit score above 680 can be considered good. However, by the time an individual is in his late 40s, that same score isn't quite as good when compared to others in their cohort. This is due to the nature of how a credit score is calculated. Things like the average age of credit and diversity of credit accounts matter a great deal. The older one gets, the easier it is to build up those two factors. Generally speaking, the average credit score goes up with age.
A college student, however, may not require a credit score above 780, therefore a ‘good credit score’ is something that changes with age. A fresh graduate is unlikely seek a mortgage, where a credit score of 640 would mean high interest rates. Therefore, it’s typically good enough for individuals in that age group to have a score between 640 and 680.
Recent college graduates are ahead of the curve if they have any credit score at all. According to data by the Consumer Financial Protection Bureau, over 30% of those between 20 and 24 years of age have no credit score. These individuals are referred to as "credit invisible".
Government regulations passed in 2009 make it more difficult for individuals below the age of 21 to open a credit account. This is a major contributing factor behind this age group struggling to attain good credit scores (or any score at all). To combat this, young adults who wish to get a good credit score should try to open up a student credit card. The requirements for these tend to be more lax. At the same time, however, they will generally not give you access to a large line of credit. Individuals with college credit card accounts, more than any other group, should be mindful of how much money they charge to their card. As we'll elaborate in the following section, it's crucial to keep your credit utilization low if you wish you establish a good credit score.
There is a wealth of information available to consumers wishing to improve their credit score. Though the exact calculations for what drives FICO scores are proprietary and unknown to the general public, the company has been open about the general some general influencing their model.
How to achieve an excellent score (800 to 850): You will need a near spotless record – one with no bankruptcies, delinquent payments, tax liens, or other negative marks. Even then, you will need to maintain such a record for several years before models begin giving you a score above 800. Consumers who have a negative mark on their credit history can still reach an excellent credit score. However, it doing so will take significantly longer. For example, it takes up to seven years for a late payment to be taken off your credit history.
How to achieve a good credit scores (680 to 799): To get a good credit score, there are three basic behaviors consumers should stick to. Opening at least one credit account is the most basic piece of advice everyone seeking a good credit score should follow . The length of your credit history accounts for 15% of your total FICO grade. The longer you wait to open your first credit card, personal loan, or mortgage, the longer it will take for your average age of credit to go up.
Another key behavior to stick to is not overusing one's credit cards. Keep your total outstanding balance low, relative to your maximum credit line. As a rule of thumb, it’s good to keep your credit utilization below 30%. FICO and other credit scoring agencies view high utilization as a sign of financial dependence on credit. Using just a minimal amount of your total credit shows you don't rely on debt to pay for your day-to-day expenses.
You should also strive to never miss due dates. As we pointed out above, a late payment can stay on your credit history for as long as 7 years. Not paying a credit card or loan bill one month can have a long-lasting impact on your score, and prevent you from obtaining a good rating.
Credit scores matter to lenders because they give a quick estimate for the risk of a given loan. People with good credit scores are more likely to repay their obligations than those with bad ones. For this same reason, lenders will make loans to people with lower credit scores more expensive. Since the financial institution is taking on a greater risk by extending a loan to such an individual, they need to be compensated appropriately. The graph below shows exactly what percentage of a population in a given credit score range is likely to miss one or more payments.