Everyone says that a good credit score is absolutely essential for a great financial future. However, the question that’s on everyone’s mind is: “What IS a good credit score?
Don’t worry if you don’t know–few people know about the intricacies of a good credit score. Whether you're buying a home, car, or trying to secure a personal loan, your excellent credit score is essential to having the good things in life without having to jump through hoops. Homebody understands, which is why we offer this guide to break down what makes a good credit score range "good" and why it matters.
A “good” FICO credit score is 670 - 739.
A "good" VantageScore typically falls within the range of 661 to 780.
According to FICO, the average American credit score is around 723.
Credit scores are numerical representations of your creditworthiness. The widely used FICO score categorizes scores as follows:
Poor: 300-579
Fair: 580-669
Good: 670-739
Very good: 740-799
Exceptional: 800-850
As you can see, a “good” credit score is 670 - 739. To see what each credit score gives you, take a look at the following breakdown:
Excellent (781-850)
Good (661-780)
Fair (601-660)
Poor (501-600)
Very poor (300-500)
You should know that FICO isn’t the only free credit score now available. Used by financial institutions and utility companies alike, the VantageScore offers a similar rating to FICO scores.
Very poor: 300 - 499
Poor: 500 - 600
Fair: 601 - 660
Good: 661 - 780
Excellent: 781 - 850
VantageScore has a number of criteria that is different than FICO credit scores. And while delving into the particulars of VantageScore’s is a bit beyond the scope of this guide, you should know that the results of the two scores are virtually the same.
As a pro tip, find out which credit score is used for what you want to do. For example, if you’re looking to get a car loan, your VantageScore should be a high priority. For a home loan, keep an eye on your FICO score.
The time it takes to achieve a good credit score can vary significantly depending on your starting point, financial behavior, and individual circumstances. Building a good credit score is a gradual process that involves responsible credit management over time. Here are some general timelines to consider:
Here are some key factors that can influence calculating credit scores and the speed of improving your credit score:
Pro tip: if you're working on improving your credit, it's a good idea to set realistic goals and seek advice from financial professionals or credit counseling services if needed.
Having a good credit score opens up avenues for better financial opportunities and terms. Some of the benefits include:
Favorable interest rates refer to lower interest rates that borrowers can qualify for when taking out loans or using credit. Lenders offer better interest rates to borrowers with good credit scores because they consider them lower risk. This means that individuals with good or excellent credit scores will pay less in interest over the life of a loan, saving them money. For example, if you have a good credit score when getting a mortgage or an auto loan, you're likely to be offered a lower interest rate compared to someone with a lower credit score.
Having a good credit score increases your chances of being approved for various types of loans, such as personal loans, auto loans, and mortgages. Lenders view individuals with good credit as reliable borrowers who are more likely to make payments on time. This improves your overall eligibility for loans and makes the application process smoother. If you have a good credit score, lenders are more likely to see you as a low-risk borrower, increasing your chances of loan approval.
A good credit score opens the door to more attractive credit card offers. You're likely to receive offers for credit cards with lower interest rates, higher credit limits, and more appealing rewards programs. These credit cards might offer cashback, travel rewards, or other perks that can save you money or enhance your spending experience. Good credit can also help you qualify for premium credit cards that come with exclusive benefits and features.
When you're looking to rent an apartment or a house, landlords often check your credit history to assess your financial responsibility. With a good credit score, you're more likely to be approved for the rental property you're interested in. Landlords see a higher credit score as an indication that you're likely to pay rent on time and meet your financial obligations.
Credit Score Range
Description
Mortgage Terms & Interest Rates
Average Mortgage Terms
Average Interest Rates
Credit score range: 760 - 850
Credit score range: 700 - 759
Credit score range: 650 - 699
Credit score range: 600 - 649
Credit score range: 300 - 599
The following shows what you’d expect when purchasing a new or used vehicle based on your credit score:
781 - 850 Excellent credit: qualifies for the best loan terms.
661 - 780 Good credit: likely to qualify for competitive rates.
601 - 660 Fair credit: may face higher rates or stricter terms.
501 - 600 Poor credit: higher rates, larger down payments.
300 - 500 Very poor credit: may struggle to get approved.
800 - 850 Excellent credit: qualifies for the best loan terms.
700 - 799 Good credit: likely to qualify for competitive rates.
600 - 699 Fair credit: may face higher rates or stricter terms.
300 - 599 Poor credit: higher rates, larger down payments.
Here’s an interesting aspect of credit scores that not many people are aware of:
In many cases, employers may check credit reports as part of the hiring process, especially for positions that involve financial responsibilities or access to sensitive information. However, the minimum credit score requirements for getting a job can vary widely depending on the employer, the nature of the job, and the industry.
There is no universal "good" credit score specifically for getting a job, as employers consider various other factors, beyond just the credit score. Instead, they may look at your overall credit history, checking for any negative items that could raise concerns about financial responsibility.
Here's a general overview of how credit scores might be considered in the context of job applications:
It's important to note that not all employers check credit reports, and even when they do, they are typically required to get your permission before doing so. Additionally, laws and regulations related to employment credit checks vary by country and jurisdiction.
If you're concerned about how your credit history might impact your job application, you can consider reviewing your credit report beforehand to ensure accuracy and address any errors or negative items.
While the definition of a "good" credit score doesn't change with age, younger individuals might have lower credit scores fall due to shorter credit histories. Generally:
Lower interest rates: good credit scores often lead to lower interest rates on loans and credit cards. This means you'll pay less in interest over time, saving you money.
Higher chance of approval: lenders are more likely to approve your credit applications, including loans and credit cards, when you have good credit.
Better loan terms: you'll have access to more favorable loan terms, such as longer repayment periods and lower monthly payments.
Higher credit limits: lenders are more willing to offer higher credit limits on credit cards for individuals with good credit.
Easier rental applications: landlords are more likely to approve rental applications and require a lower security deposit for individuals with good credit.
Employment opportunities: some employers may check credit history as part of the hiring process, and good credit can reflect positively on your financial responsibility.
Lower insurance premiums: good credit can lead to lower insurance premiums for auto, home, and renters insurance.
Access to premium rewards: credit cards with rewards programs, cashback offers, and travel benefits are more accessible to those with good credit.
Negotiating power: you can negotiate better terms and rates with lenders when you have a strong credit profile.
Faster loan approval: good credit can lead to quicker mortgage loan approval processes, making it easier to take advantage of time-sensitive opportunities.
Security deposits: utility, credit card companies and service providers may waive security deposit requirements for individuals with good credit.
Better rental housing: good credit makes it easier to secure rental housing, especially in competitive rental markets.
Lower cost of borrowing: over the long term, good credit can result in significant savings due to lower borrowing costs.
Financial flexibility: with good credit, you have more financial options and can take advantage of opportunities as they arise.
Improved financial reputation: maintaining good credit contributes to a positive financial reputation and demonstrates responsible money management.
Reduced stress: good credit helps you avoid financial stress, as you're more likely to have access to affordable credit when you need it.
Regardless of where your credit score currently stands, taking steps to improve it can offer substantial benefits. Here's a guide:
Consistent and timely payments
Limiting hard credit inquiries
Maintaining a low credit utilization
Monitoring and reporting errors
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Multiple factors can negatively affect your credit score, including:
VantageScore factors include:
Credit scores influence the interest rates offered to consumers. Those with higher credit scores generally receive lower interest rates because they're perceived as lower risk by lenders. A higher credit score signals responsible financial behavior, making lenders more confident about timely repayments.
Payment history is a record of your payments on credit accounts, including whether you've paid on time. It's a significant factor in most credit scoring models because it's an indicator of your financial reliability. Late or missed payments extend credit and can negatively impact your credit score.
Different credit scores exist because various companies and credit scoring models calculate scores based on their criteria. For instance, FICO® and VantageScore are two popular credit scoring system and models, but they weigh credit factors slightly differently. Additionally, lenders might customize these models based on their specific needs. Moreover, scores might differ between credit bureaus due to the data they have on file.
A 740 credit score is generally considered "very good" on the credit score scale. This means individuals with this very good credit score range, are likely to be viewed favorably by lenders and qualify for a wide range of credit offers with competitive interest rates.
A good credit score is a valuable asset that opens doors to favorable financial opportunities. Whether you're aiming to buy a home, secure a loan, or simply enjoy lower interest rates, having a good credit score can pave the way for a financially secure future.
At Homebody, we believe in empowering you with the knowledge to make informed financial decisions. Your credit journey matters, and we're here every step of the way. Homebody offers a wealth of financial knowledge so you can make the best decisions for you, your family, your home, and everything else you value in life!
Get a quote with Homebody today and enjoy the peace of mind you deserve.
