What is a good credit score?
Fair Isaac Corp. produces the most commonly used credit scoring algorithm in the United States. Most FICO scores range from 300 to 850, and the higher the score, the better. (Some versions of the FICO score, such as those for the auto and credit card industries, are on a 250 to 900 scale.)
Each lender sets its own standards for what constitutes a “good” FICO score. But, in general, FICO scores fall along the following lines:
- 300-629: Bad credit
- 630-689: Fair credit
- 690-719: Good credit
- 720 and up: Excellent credit
The average FICO score was 695, according to the latest data, from April 2015. About 22% of scores fall below 600; 23.3% from 600 to 699; and 54.7% are 700 or above.
Here’s how those scores break down within each range, by percentage of scores:
How FICO scores stack up
|Source: FICO Score 8 data as of April 2015, courtesy of Fair Isaac Corp.|
|300 - 499||4.9%||650 - 699||13.0%|
|500 - 549||7.6%||700 - 749||16.6%|
|550 - 599||9.4%||750 - 799||18.2%|
|600 - 649||10.3%||800 to 850||19.9%|
But there are several commonly used credit scores, not just FICO. The increasingly used VantageScore also employs a 300-850 scoring range, as do most other credit scores. “Good” or “excellent” scores depend on what an individual lender decides, but in general 720 and up is considered excellent.
The average VantageScore in 2016 was 673, according to credit reporting agency Experian.
How VantageScores stack up
|Source: VantageScore data as of March 2016, courtesy of Experian|
|300 - 499||4.6%||650 - 699||18.3%|
|500 - 549||12.1%||700 - 749||12.6%|
|550 - 599||11.8%||750 - 799||14.6%|
|600 - 649||10.2%||800 to 850||15.7%|
Even if your score is in the low 500s, you may still be able to get credit, but it will come with very high interest rates or with specific conditions, such as depositing money to get a secured credit card. You may have to pay more for car insurance or put down deposits on utilities.
At the other end of the scale, borrowers with scores above 750 or so have many options, including the ability to qualify for 0% financing on cars and 0% credit cards.
That’s why you want good credit.
Find the starting point
The important thing is to use the same score every time you check, as each weighs your credit history a little differently. (Doing otherwise is like trying to monitor your weight on different scales — or possibly switching from pounds to kilograms.) Some sources may be using a different scale entirely; Citi, for example, gives some customers access to NextGen FICO credit card scores, which are on a 250-900 scale.
So, pick a score and stick with it to monitor your progress. Advancements you make measured by one score will be reflected in the others. (Here’s how to improve your credit scores; the advice applies to whatever score you decide to track.)
And be aware that, like weight, scores fluctuate. Your score is a snapshot that can vary every time you check it. But so long as you keep it in a healthy range, those variations won’t have an impact on your financial well-being.
Lenders look at more than credit scores
When you go to borrow money, a good credit score does not guarantee a good interest rate — or even approval.
Credit scores look at your reported credit history to gauge the likelihood that you will repay borrowed money; you can be deep in debt and still have great credit scores if you have paid all your bills on time.
But your credit reports don’t reflect whether you can afford to repay the credit you are applying for. That’s why your income and other debts play a key factor in some lending decisions, as lenders consider what you owe alongside what you earn and assets you have accumulated.
This article updated June 10, 2016. It originally published Jan. 30, 2016.