What is a Good Credit Score?

April 27, 2020 | by Jacob Hamilton

what is good credit

A good credit score is typically above a 670, on the scale of 300 to 850. If you’re in the market for a credit card, car loan or mortgage, lenders will use this three-digit score to determine your credit risk and consider in their approval to give you credit.

We know credit can feel intimidating—but once you know how your credit score is calculated, it’ll help you understand how to maintain a good score, or the fastest road to a better credit score.

We’ll break down in detail the scoring system, what’s considered a good credit score, how your score can help you and how to improve your credit score.

Understanding the Credit Scoring System

There are two main credit scoring systems that lenders model their score after: FICO® and VantageScore.

The FICO® Score is still the most widely used scoring method today (many banks and lenders use FICO®). And although the system is updated occasionally to weigh factors differently, the most recent update being FICO® 9, the score is always based on five factors:

  • Payment history
  • Accounts owed
  • Length of credit history
  • New credit
  • Credit mix

In an effort to compete with FICO®, credit bureaus developed their own scoring system called VantageScore, which has three versions (1.0, 2.0 and 3.0). Both systems are on a scale from 300 to 850, but the major difference is how they weigh each factor (the five we listed above). Since FICO® claims that 90% of top lenders use their scoring system, we based the following score ranges on their method.

credit score range

A good credit score is one above 670, which shows lenders that you can probably be depended upon to repay a loan on time. Once you earn a “very good” or “exceptional” credit score (above 740), the lender can trust that you’re dependable and at an even lower risk to miss a loan payment.

What Are the Factors Involved in Your Credit Score?

Like we said up above, there are five main factors that play into your credit score. These help the lender weigh the risk of lending to you.

  • Payment history (35%): The most heavily weighed factor and the most important to lenders is if you’ve paid past accounts on time.
  • Amounts owed (30%): Lenders will weigh how much of your available credit you owe on other accounts. It’s good for you to show that you’re using your credit. However, if you’re using a lot or even most of your available credit, lenders might see you as overextended.
  • Length of credit history (15%): Your score takes into account the history of other credit accounts. This includes how long your accounts have been open and how long it’s been since you used each account.
  • Credit mix (10%): The different types of credit accounts you have open will be taken into account, such as your mortgage loans, car loans, credit cards, finance accounts and more. It’s not necessary to have every type of credit account (although diversity helps!), it’s more important that each account you do have is managed responsibly.
  • New credit (10%): Opening too many new accounts in a short amount of time can appear risky to lenders, so they’ll weigh how much time passed between the opening of each account.
  • Each of the five factors carries different weight based on its importance in calculating your credit risk. The FICO® score is weighted accordingly:

how is your fico score weighed

How Can a Good Credit Score Help You?

A good credit score can help you not only save money on loans, but also find a job and apply for apartments. Here are some other ways that a good credit score affects your financial future:

  • Credit approval: First things first, a good credit score will show lenders that you’re a low-risk borrower, ultimately giving you a higher chance of approval on credit cards and loans.
  • Lower interest rates: The higher your credit score, the more confidence a lender has in your ability to pay your bills on time. In turn, this will help you qualify for the best interest rates and lower finance charges.
  • Higher rewards: A high credit score will help you qualify for a number of credit card perks, including rewards and cash back. These perks will not only reward you financially, but will also encourage you to use your credit card, which if used responsibly, may help to improve your credit score.
  • Higher limits: The amount of credit you can borrow is based on your income and credit score. A good credit score will show banks that you can probably be trusted to pay your bills on time; therefore, they’ll be willing to extend a higher credit limit.
  • Rental approval: When you rent a house or apartment, many landlords run a credit check on you during their tenant screening process. A good credit score gives them more assurance that you will pay your rent on time and will give you a leg up on a rental applicant with a bad credit score.
  • Fewer security deposits: Utility companies will often require a security deposit to ensure payment if you don’t pay your bill on time. If you have good credit, it’s less likely that they will request a deposit from you.

How Do You Get a Good Credit Score?

If you have a bad credit score, don’t worry—it’s not too late to make improvements.

The first thing you’ll want to do is check your credit report for any errors. If you see something that’s questionable, challenge it. It’s only fair that your credit score reflects your activity before you begin to fix it. Here are a few steps you can take to improve your credit score.

Always pay on time: It may seem easier said than done, but paying your bills on time is the most important factor in improving your credit score. As we mentioned earlier, your payment history accounts for 35% of your credit score, so missing a payment can have a significant impact on your score. Sign up for online payments and enroll in automatic payment reminders if your bank or lender offers it to avoid late payments.

  • Reduce your debt: We get it—reducing your debt is not as simple as it sounds. But there are ways to strategically reduce your debt even if you’re not able to pay it all off. First, focus on paying off debt with the highest interest rates and making minimum payments on those with the lowest interest rates. Additionally, try to pay off your revolving debt, or your credit card debt, to show that you can pay off the same amount every month.
  • Number of credit accounts: Although credit mix is a factor in your credit score, it’s unlikely that more accounts will help build your credit score. In fact, opening too many credit accounts quickly will look risky. Only open a credit card if you need it.

  • Keep credit utilization at 30%: Avoid spending more than 30% of your total credit limit on each account. For example, if you have a limit of $10,000 on one credit card, try not to carry more than $3,000 on that card.
  • Take age into account: Remember that length of credit history carries 15% of the weight on your credit score. This can’t be rushed, so keep your accounts open even if you’re not using them to showcase the age of your credit.

How Do I Find Out What My Credit Score Is?

There are a few ways that you can see your credit score. Keep in mind that you may actually see different scores when using different services depending on the reporting company they utilize.

First, take a look at the credit card or loan company you use (major companies often offer a credit score report to their customers online). You can also talk to a credit counselor who provides customers with free credit reports and reviews.

There are also lots of credit score services available, many of which are unpaid. You get one free report each year from the three credit bureaus: TransUnion, Equifax and Experian .

If you’re navigating through your credit report and are unhappy with the credit score you see, don’t be discouraged. Set financial goals for yourself to help increase your score over a long period of time. If you want help with your credit, CreditRepair.com will help challenge inaccuracies and monitor your credit score on your behalf.


Jacob Hamilton

Jacob Hamilton

GM of CreditRepair.com

With his master's degree from the University of Phoenix, Jacob has been working as the General Manager for CreditRepair.com for 2 years. Jacob is passionate about consumer finances and doing everything he can to make credit repair accessible....

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