Your credit score plays a major role in your financial life. If you’re wondering what is a good score? The answer can help you understand where you stand and what opportunities may be available to you. A good score typically falls within the mid to high 600s or above. A score in the high 700s or 800s is considered excellent. In 2023, the average FICO® Score in the U.S. was 715, which falls within the good range.

Lenders use credit scores to determine your eligibility for loans and credit cards. A higher credit score often leads to lower interest rates and better terms. While scoring models may vary, understanding the factors that influence your score can help you improve it over time.

Understanding Credit Score Ranges

It’s important to understand the different scoring models. The two most common models are the FICO® Score and the VantageScore®, both of which range from 300 to 850. Here’s how they categorize scores:

FICO® Score Ranges:

• Poor: 300-579
• Fair: 580-669
• Good: 670-739
• Very Good: 740-799
• Exceptional: 800-850

VantageScore® Ranges:

• Subprime: 300-600
• Near Prime: 601-660
• Prime: 661-780
• Super Prime: 781-850

A good credit score is usually considered to be 670 or higher for FICO® Scores and 661 or higher for VantageScore®.

What Affects Your Credit Score?

Your credit score is calculated based on several key factors. Understanding these factors can help you take control of your financial health.

1. Payment History: Your ability to pay bills on time is the most important factor, making up 35% of your FICO® Score.
2. Credit Utilization: The amount of credit you’re using compared to your total available credit accounts for 30% of your score.
3. Length of Credit History: The age of your accounts matters, with longer histories generally resulting in higher scores.
4. Credit Mix: Having a variety of credit accounts, such as credit cards and loans, can positively impact your score.
5. New Credit: Opening multiple new accounts in a short period can temporarily lower your score.

How to Improve Your Credit Score

Improving your score takes time and effort, but it can lead to better financial opportunities. Here are a few actionable steps to boost your credit:

• Pay Bills on Time: Consistently making on-time payments is crucial for maintaining a good score.
• Lower Credit Utilization: Try to keep your credit utilization below 30% of your total credit limit.
• Check Your Credit Report Regularly: Reviewing your credit report can help you catch errors and dispute inaccuracies.
• Avoid Opening Too Many Accounts: Be strategic about applying for new credit to avoid unnecessary hard inquiries.
• Diversify Your Credit Mix: Having a combination of revolving credit and installment loans can enhance your score.

Why a Good Credit Score Matters

Having a good score can open many doors and provide financial benefits, such as:

• Lower interest rates on loans and credit cards
• Better chances of loan approval
• Higher credit limits
• Lower insurance premiums
• Easier approval for rental properties

What Is a Good Score for Major Purchases?

When planning major financial decisions, such as buying a house or a car, knowing your score is essential.

• Buying a Home: A FICO® Score of at least 670 is generally considered good for securing a mortgage. However, government-backed loans may allow lower scores.
• Buying a Car: Auto lenders prefer a VantageScore® of 661 or higher, but options exist for those with lower scores.

The Bottom Line

So, what is a good credit score? In general, a score of 670 or higher is considered good and can help you access better financial opportunities. By understanding the factors that impact your credit score and taking proactive steps to improve it, you can achieve financial stability and take advantage of lower interest rates and better loan terms.

If you ever need expert assistance or guidance on your credit journey, don’t hesitate to reach out to the Nerds! Additionally, stay updated with the latest tips and information by following us on Facebook, Instagram and TikTok!