On a scale of 300 to 850, a good credit score generally starts around 690. Scores above 720 are considered excellent by FICO and VantageScore, the two most common scoring systems.
Lenders, such as credit card issuers and mortgage providers, may set their own standards on what “good credit” means as they decide whether to grant you credit and at what interest rate. In practice, though, a good credit score is the one that helps you get what you need or want, whether that’s access to new credit in a pinch or lower mortgage rates.
FICO, the most widely known credit scoring system, and its competitor VantageScore both use a 300-850 range. They both weigh on-time payments as the most-important factor affecting your score, followed by how much of your credit limits you’re using, which is called credit utilization.
The majority of credit scores are 650 or above. The average FICO score hit a record 704 in 2018, according to FICO (for the FICO 8, the version most commonly used in credit decisions). The average VantageScore in 2019 was 682, according to credit bureau Experian. Data is not yet available on how the COVID-19 financial crisis has affected credit scores.
What a good credit score can get you
Having good credit matters because it determines whether you can borrow money and how much you’ll pay in interest to do so.
Among the things a good credit score can help you get:
- An unsecured credit card with a decent interest rate, or even a balance-transfer card.
- A desirable car loan or lease.
- A mortgage.
- A way to pay expenses in a crisis in the event you don’t have an emergency fund or it runs out.
A good credit score helps in other ways: In many states, people with higher credit scores pay less for car insurance. In addition, some landlords use credit scores to screen tenants.
So having a good credit score is helpful whether you plan to apply for credit or not.
How to get a good credit score
Good credit habits, practiced consistently, build toward a good credit score. Here’s what you need to do:
- Pay bills on time. This is important because payment history has the largest impact of all the factors in your score. A missed or late payment can do tremendous damage to a credit score and it can stay on your credit report for up to 7 years.
- Try to keep your credit card balances well below your credit limits; aim for credit utilization under 30%, and lower is better. High utilization dings your score, but the damage will fade when you’re able to reduce your balances and the lower utilization shows up on your credit reports. You also may be able to lower utilization by getting a higher credit limit or becoming an authorized user on a lightly used card with a large limit.
- Keep credit accounts open unless there is a compelling reason, such as high fees or poor service, to close them. Keeping older accounts open helps your average age of accounts, which is a secondary influence on your score. Also, closing an account cuts into your overall credit limit, driving up your credit utilization.
- Avoid making several credit applications in a short time frame. Credit checks for the purpose of credit decisions can cause a small, temporary dip in your score, and several in a short time can add up.
- Monitor your credit reports and dispute information you believe is incorrect or too old to be included (most negative information falls off after seven years).