If you’ve been working on building your credit, you may be wondering whether you have fair credit or good credit. Though the two may sound like they’re not that far apart, there are a few differences between them.
The pros of having good credit rather than fair (also called average) credit can be worth the effort to build your score.
Fair credit and good credit defined ranges
On the credit score scale, fair credit and good credit each have their own distinct ranges. Most FICO scores use a 300-850 point range, as does FICO’s competitor, VantageScore. Average, or fair, credit is considered 630 to 689. A good score is anything from 690 to 719.
Even though these two bands of scores lie next to each other on the credit score scale, there can be some big differences between the financial opportunities that are available to you in each.
Financial opportunities with fair credit and good credit
The main motivation for moving your credit score from average to good is getting access to better financial opportunities:
- With a higher credit score, you can get more beneficial interest rates on loans, insurance and credit cards.
- You’ll also have access to credit card offers with better rewards, cash back and maybe even 0% interest rates.
- With credit scores beyond fair, you will likely also have an easier time renting a place or passing credit checks by potential employers.
Don’t stress out if you have only fair credit now; you can work toward restoring your credit. In the meantime, maintain your fair credit so that you at least have the same level of opportunities you enjoy now.
How to build your credit to good and beyond
With so many benefits to moving your credit score from fair to good — or even excellent — there’s no reason not to strive for a higher score.
One way you can do this is to take a look at your free credit reports. See what negative marks you have and form a plan to resolve them. For example, if you’re carrying debt and have been slow to repay, then prioritize paying off debt and its associated interest. Put as much of your disposable income as you can afford toward the debts with the highest interest rates. As those debts disappear, work your way downward by interest rate amount until you have paid off all your debt.
While you’re doing this, establish good financial habits, such as always repaying your debts as agreed. When it comes to credit cards, pay your bill off in full and on time each month.
Lastly, dispute any errors you see on your credit reports. Your fair credit could improve within a month or two of mistakes being corrected by the reporting bureau.
This article was updated Aug. 26, 2016. It originally published Jan. 4, 2015.
Image via iStock.