You've probably heard that you need a "good" credit score, but what
exactly does that mean?
To achieve and maintain a healthy credit score, it's essential to
understand how the different credit scoring models work and what
makes a score "good."
Here's what you need to know to maintain a good credit score -- and
why it matters.
What are the different types of credit scores?
While you'll receive a credit score from all three major credit bureaus
(Experian, Equifax, and TransUnion), lenders use two major credit scores
to determine your creditworthiness: FICO (Fair Isaac and Company) and
Both FICO and VantageScore offers scores ranging from 300 to 850.
Your score is calculated by several different factors in your credit report
that help lenders assess whether you're a reasonable lending risk.
What is a "good" credit score?
Given that 300 to 850 is a pretty big range, you're probably wondering
where "good" falls. According to Experian,1 here's how FICO and
VantageScore break down their different score ranges:
Very Poor: 300-579
Very Good: 740-799
Very Poor: 300-499
In other words, "good" means something slightly different for each of
the major credit scores. But in general, a score that's at least 661 to 670
is considered good — and the higher the score, the better it is.
As of December 2020,2 the average FICO score for U.S. consumers was
711. If you're curious how you stack up against your peers, here are the
average credit scores by age range, according to Experian:
18 to 23 years old: 674
24 to 39 years old: 680
40 to 55: 699
56 to 74 years old: 736
75+ years old: 758
Why do I need a good credit score?
Having a good credit score makes it easier to borrow money for your bigger life goals, like buying a car or a home. When you do need to
borrow money, you'll have a broader range of lenders to choose from
(enabling you to shop around) and generally lower interest rates. A
lower credit score could leave you with limited choices and substantially
Since a lower interest rate reduces your overall borrowing costs, this
allows you to save for other goals — or stretch for that slightly more
But it's not just lenders that are looking at your credit score. Landlords
will almost always run a credit report before renting an apartment or
home to you. The lower your credit score, the more risk there is that you
will default on your rent. The best rentals typically go to applicants with
higher credit scores, especially in competitive rental markets.
Your credit score can also come into play in some unexpected places.
According to Consumer Reports, many car insurance companies will
charge drivers with less-than-stellar credit significantly more3 than they
charge those with very good or excellent credit. Their rationale: they
believe credit scores are a good predictor of future insurance claims.
(Several states, including Georgia, prohibit or restrict the use of credit
score in insurance pricing.)
Some employers even use credit scores as part of the hiring process4 to
evaluate candidates for positions that require you to manage financial
matters. A poor credit history might indicate that you're not adept at
managing money and therefore not the best fit for the position.
How can I get a higher credit score and keep it there?
Both FICO and VantageScore take many factors into account when
calculating your score, including:
How much of your available credit you're using at a given time.
How often you apply for credit.
Taking some simple, practical financial steps can help boost your credit score into the "good" range. Use these tips to shore-up your score and
keep it there:
Make your payments on time: Try setting up automatic payments
for at least the minimum due to avoid missing a payment.
Keep your revolving credit utilization below 30%: If you max out
all your credit lines, lenders tend to think you aren't managing your
Apply for credit sparingly: While one inquiry on your credit report
won't likely impact your score, several inquiries in a short period (less than a year)5 can bring your score down.
Now you know what the two major scoring systems consider to be a
"good" credit score. And if your score isn't there yet, don't worry. Small
steps with your finances can bring your score up and get you settled
into a good score that's ready and waiting when you need it.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Experian, "What Is a Good Credit Score?" Accessed December 29,
Stefan Lembo Stolba, "What Is the Average Credit Score in the U.S.? "
Experian, published December 8, 2020, accessed December 29, 2020.
Consumer Reports, "Car Insurance Buying Guide," updated
September 26, 2019, accessed December 29, 2020.
Brianna McGurran, "Do Employers Look at Credit Reports?"
CreditCards.com, published August 6, 2019, accessed December 30,
MyFico, "Credit Checks: What are credit inquiries and how do they
affect your FICO® Score?" Accessed December 29, 2020.
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