What Is a Good Credit Score, and How Do I Improve My Scores?

Most credit bureaus evaluate credit scores on a scale of 300–850, and a score between 690–720 range is considered good. However, the definition of good credit scores can differ depending on which purpose you are applying for. Moreover, different lenders set their own criteria for what they consider to be a good credit score. Here’s an example:

A landlord can offer to rent their apartment to people with specific credit scores, i.e., above 720. So, in this case, even a credit score of 690 may not be considered good enough. Therefore, there’s no one fixed answer to “what is a good credit score”.  Different scoring models, like FICO and VantageScore, often use different scoring ranges when categorizing your scores.

So, What Is a Universally Good Credit Score?

As a general standard, a 700 credit score is universally considered good. However, the credit ranges depending on the FICO and VantageScore scales usually differ.

According to FICO, a credit score above 670 is classified as “Good”, while a score above 740 is classified as “Very Good” and an 800+ credit score is classified as “Excellent”.

On the other hand, as per VantageScore, a credit score of 661 and above is considered “Good”. It categorizes your scores in the following way:

• Excellent: 781–850
• Good: 661–780
• Fair: 601–660

Higher scores can land you in a more favorable credit standing. So, in this blog, we’ll disclose everything from “why good credit scores matter” to actionable strategies and DIY tools to help you improve your credit.

Why Is Having a Good Credit Score Important

Good or bad credit, your credit scores ultimately determine whether you will get approved for buying a home, a car, a new loan, and many other aspects of your life. Favorable scores help you in many ways, largely because they tell the lenders that you can pay back the debt you owe in due time.

There are several benefits to having a good credit score.

• A person with a good score enjoys more financial freedom, favorable borrowing opportunities, and most importantly, enhanced purchasing power. 
• A good credit score helps you access a wide range of financial services. It improves your chances of getting better interest rates, leasing opportunities, and more.
• The higher your scores, the more favorable your chances of getting approved for a particular financial service.

Therefore, it is best to work on building good credit to fulfill your financial goals, especially when terms like interest rates are in the mix. For instance, when you want to apply for financing for certain things, such as renting an apartment, getting a mortgage, or buying a car. 

Here Are Some Things You Can Get With a Good Credit Score

▪ Applying for a Credit Card

When you are getting ready to apply for a credit card, your first thought might be, “What credit score do you need to get a credit card?”. To answer this question, a score of 660–720 or above will qualify you to get easily approved for most credit cards. But if your scores are below 660, it can be challenging to get approved even though your scores may be in the “Fair” category. 

Best Score: 700 and above  

▪ Getting a Mortgage to Buy a House

A minimum 620 credit score can help you qualify for a mortgage. However, you can also qualify for a mortgage, such as those backed by the government, like FHA (Federal Housing Administration), with lower credit scores. There are also other grants, such as VA (Veterans Affairs) loans for army members to get subsidized housing. But for buying your dream house, you may need higher scores. 

Best Score: 660–700 or better (for best loan terms and lower interest)

▪ For Rental Lease Approval

When you are looking to rent an apartment, you need at least a minimum 670–739 score. In fact, in mainstream locations with competitive markets like New York, Boston, or California, landlords actively prioritize applicants with 700+ credit scores.

Best Score: 700 and higher

▪ Financing for a Car Loan

661–684 is the required credit score for auto loans, in case you are wondering, “What is a good credit score to buy a car?”.  Higher credit scores mean better interest rates. So, people with credit scores of 700 or higher usually get more favorable loan terms. However, if your credit score is below 700, it’s best to work on improving it before applying for a car loan.

Best Score: 684–700 or better

However, a good credit score does not guarantee approval since there are various other factors that lenders consider. So, under these circumstances, it helps to work on improving your credit score for better chances of getting approved. 

How to Improve Credit Score?

There are various ways to improve your credit score, including good credit habits and using a DIY credit repair app like CoolCredit.

Here Are a Few Tips That Can Help You Boost Your Credit Scores:

• Avoid Late Payments at All Costs: It’s best to always pay all your bills on time and avoid late payments. This is important as even one payment that is delayed by 30 days can negatively impact your score, i.e., cause a 100-point drop in one go. Moreover, it can stay on your credit report for almost 7 years. So, if you are late making a payment, reach out to your creditor and try working things out with them. 
• Maintain a Low Credit Utilization Rate: Try keeping your credit card balances low. Having a low credit utilization rate i.e., 30% or less can help you maintain a good credit score. In fact, the ones with excellent credit scores often have an overall utilization rate in the single digits.
• Build a Favorable Credit Mix: All your open accounts will get reported to the credit bureaus. So, if you close any credit accounts, i.e., by paying off the debt, your scores can drop as closed accounts affect your debt-to-income ratio. However, opening a newer one may help you keep the momentum going. Ensure that any new credit lines you open are added to your credit report. 
• Keep a Distance Between Opening New Credit Lines: Applying for credit lines back to back can lead to multiple hard inquiries. This can hit your credit hard and fast, i.e., cause a significant drop in your scores, which is bad for your credit score. So, make sure to apply for any new credit lines at least 6 months after obtaining your previous one.
• Regularly Monitor Your Credit: With regular credit monitoring, you can keep track of the changes to your score and avoid risking your credit health. Checking your credit report at least once a month is ideal. For this, you can use a DIY credit repair app like CoolCredit. This allows you to instantly fetch your report, plus, its AI-powered system can analyze the negative items on your report and provide tips on how to fix the issues so you can boost your scores.
• Raise a Dispute for Errors on Your Credit Report: Another crucial step to give your credit scores a significant boost is to raise disputes for any wrongful information on your credit report. Almost 91% of users reported at least 1 error on their report. So, it's crucial to take the right steps to raise a dispute quickly before your credit takes a permanent hit. For this, you can also use the CoolCredit app, which offers pre-made dispute letter templates to avoid hassle and ensure swift action.

In summary, improving your credit score involves opening accounts that report to credit bureaus, maintaining low balances, paying bills on time, and limiting the frequency of new account applications.

What Factors Affect Your Credit Score?

FICO and VantageScore have different approaches to explain the relative importance of the categories. However, they both consider the following 5 factors:

1. Payment History (35%) 

This involves whether you have responsible financial habits, i.e., on-time payments, late payments, missing payments, bankruptcy records (if any), collection accounts (if any), etc.

2. Amount You Owe (30%) 

How many of your accounts are open, their balances, how much you still owe, and how much of the credit limit you are using—they all come into play here.

3. Length of Credit History (15%) 

This involves the average age of all your credit accounts, i.e., the length of how long you’ve had debt, including the old and new. 

4. Credit Mix (10%) 

This considers whether you can manage different types of accounts (installment accounts like a car or personal loan and revolving accounts like credit cards or other types of credit lines). It helps your credit score.

5. New Credit Lines (10%)

This considers your recent activity, i.e., whether you recently applied for or opened new accounts. 

The percentage of each factor is how much they influence your credit. This means your payment history and the amount owed are the two most influential factors on your credit report.

What Information Credit Scores Do Not Consider?

Credit scores don't consider the following factors: 

• Personal Characteristics/Details: As per U.S. Laws, your race, color, religion, ethnicity, residency status (i.e., national or international origin), sex, and marital status do not affect your credit scores.

• Your Age: FICO and VantageScore don’t directly consider age as a factor for credit score assessment. However, it is a factor that lenders and credit card companies usually consider. For instance, when a minor applies for a credit card, they often require a cosigner parent or guardian, as the younger individuals may not have a well-established credit history. 

• Employment History: Whether you are a salaried employee, unemployed, self-employed, belong to any particular occupation, your job title, and other details of your employment history do not affect the credit score assessment. But, these are important factors that the lenders usually consider when making the approval decision.

• Your Geographic Location: Where you live does not impact the credit score estimation.

• Credit Monitoring: When a company or you check your own credit scores with soft inquiries, it does not impact your credit assessment.  

• Debit Card Payments: While your credit card activity is a significant factor in determining your credit score, any payments made by your debit card are not considered a liability. 

• Child Support and Alimony Payments:  These are usually not considered as these payments are not made to a lender or credit institute.  

Conclusion

The bottom line is that there’s no one specific answer to what is considered a good credit score, but if you keep your credit score above 700, you should be in a favorable credit position. However, lower credit scores i.e., those around 580, can be improved by displaying responsible financial behavior. For this, you need to ensure making on-time payments, avoid defaulting on loans, and make other efforts. For instance, ai credit repair to start improving your credit can be a step in the right direction. Doing so can help you regularly monitor your credit, identify negative items on your credit report, and raise disputes for any errors, without much hassle.

FAQs

Q: How Do I Get a Good Credit Score? 

A: For this, you need to start building your credit by taking small loans and paying them back on time. Your on-time payments get reported to the credit bureau, and these help you get a good credit score. Additionally, you should keep an eye on your credit reports and dispute any errors as quickly as possible to avoid credit damage. You also need to maintain good financial behavior in the long term.

Q: How Long Does It Take to Get a Good Credit Score?

A: It takes almost 6 months to get a good credit score if you are starting from scratch. However, if you have a bad credit score, this may take more time and effort. So, it will most likely take you much longer, depending on how low your credit scores are.

Q: How Do I Find Out What My Credit Scores Are? 

A: You can apply for a free credit report once a year from the 3 major credit bureaus—Experian, Equifax, and TransUnion. Or, you can also use the CoolCredit app for credit monitoring. It will instantly fetch your scores from all three bureau(s) as well as provide a range of credit resources for education, tools for credit repair, and much more. 

Q: What Is a Good Credit Score Range? 

A: Minimum credit scores from 660 to 740 are considered a good credit score range. 

Q: What Makes a Good FICO Score?

A: A FICO credit score between 670 and 739 is considered good, while a score between 740–799 is considered very good.

Q: What Makes a Good VantageScore?

A: As per the latest models, VantageScore defines credit scores between 661 and 780 as good.

Q: What’s a Good Credit Score to Rent an Apartment?

A: Your rental application can get easily approved with a 700+ credit score. However, generally, a minimum of 670–739 score is required by most landlords.