What Is a Good Credit Score, and How to Get and Keep It?
What is a good credit score? Well! Let’s begin with this—a person with a good credit score enjoys more financial freedom, suitable borrowing opportunities, and more importantly purchasing power.
A credit score of 700 and above is considered good, and 800 and above is considered excellent for a range between 300 and 850. However, VantageScore’s 2021 data shows that the average credit score in the US is 698.
There are several benefits of having a good credit score. It improves your chances of getting better interest rates, leasing opportunities, and more. Having said that, you also need to remember that lenders will most likely have different criteria.
Let’s dive right into the details without further ado.
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How Does a Good Credit Score Help?
A good credit score helps you in many ways, largely because it tells the lenders that you can pay back the debt you owe in due time.
Rest assured a good credit score will help you access a wide range of financial services. For instance, loans with lower interest rates and flexible terms. Besides this, you also have to keep in mind, that the higher your scores, the more favorable your chances of getting approved for a particular financial service.
However, things get tricky when loan terms like low-interest rates are in question. In other words, even a good credit score will not guarantee approval. So, under these circumstances, irrespective of the factors considered by the lenders, you have to ensure your credit score is good. This may not ensure approval but will help increase your chances of getting a loan approved.
How to Improve Credit Score?
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.
Here Are a Few Other Things to Try:
- At least make a minimum payment and always make all debt payments on time. Even one payment late by 30 days or more can negatively impact your score and stay on your credit report for almost 7 years. If you are late making a payment, reach out to your creditor and try working things out with them.
- Try keeping your credit card balances low. Having a low credit utilization rate can help your credit score. The ones with excellent credit scores have an overall utilization rate in the single digits.
- Open accounts that will get reported to the credit bureaus. If you have a few credit accounts, ensure the ones you open are added to your credit report.
- Apply for credit when you need it. Opening a new credit account can lead to hard inquiry, which is bad for your credit score.
- With regular credit monitoring, you can keep track of the changes to your score and avoid risking your credit health. You can instantly dispute an error using a DIY credit repair app like CoolCredit that offers pre-made dispute letter templates.
Which Factors Affect Your Credit Score?
These are often divided into five categories.
- Payment History - Making on-time payments or missing them affects your credit score. On top of that, filing for bankruptcy or getting an account sent to collections can hurt your score.
- Credit Utilization Ratio - How many of your accounts have balances, how much you owe, how much of the credit limit you are using—they all come into play here.
- Length of Credit History - This involves the average age of all your credit accounts, including the old and new.
- Credit Mix - 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.
- Recent Activity - This considers whether you recently applied for or opened new accounts.
FICO and VantageScore have different approaches to explain the relative importance of the categories.
What Are Credit Score Ranges?
There are different scores. Below you will find a complete breakdown of credit score ranges:
What Makes a Good FICO Score?
The score range starts from 300 to 850, and a good FICO credit score is 670 and 739. FICO makes different types of credit scores. There are base scores for lenders in multiple industries, credit issuers, and auto lenders.
FICO’s industry-specific credit score range is from 250 to 900.
What Makes a Good VantageScore?
Its first two scoring models ranged between 501 and 990, but the two newest scores run between 300 and 850. As per the latest models, VantageScore defines credit scores between 661 and 780 as good.
What Is a Good Credit Score to Purchase a House?
You should always aim to have and maintain a good credit score to qualify for a lower-rate mortgage. And that good FICO score is 670 and above.
The minimum credit score is 500-700 to purchase a house, but it will depend on the lender and the type of mortgage you apply for. Several lenders require a minimum credit score of 620, while others may have different requirements.
- FHA loans require a minimum credit score of 500 when you put 10% down and 580 when you put 3.5% down.
- USDA loans don’t have a specific credit score requirement, but lenders want a minimum score of 580.
- VA loans don’t have a specific credit score requirement either, but lenders want a minimum score of 620 and above.
Note that your credit score plays a significant role in determining the payment terms and interest rate. Lenders decide the interest based on how risky they think you are. Although it’s not entirely impossible to get a mortgage with bad credit, the terms may not be that great.
What Is a Good Credit Score to Purchase a Car?
There’s no specific minimum credit score requirement to purchase a car, but you should aim for a score of 670 and above. It puts you in the good credit range.
The same rule applies here. The higher your credit score, the better auto loan terms you get. If your FICO score is below 670, try building your credit before buying a car. You can use a trusted self-credit repair app like CoolCredit to get started.
What Are the Differences between FICO and VantageScore Factors?
|Payment History: 35%
|Total Credit Usage: Extremely influential
|Amounts Owed: 30%
|Credit Mix: Highly influential
|Length of Credit History: 15%
|Payment History: Moderately influential
|Credit Mix: 10%
|Age of Credit History: Less influential
|New Credit: 10%
New Accounts: Less influential
What Information Do FICO and VantageScore Not Consider While Calculating Credit Scores?
- Your race, marital status, religion, color, gender, or national origin. (The US law forbids credit scoring formulas to consider any of these factors.)
- Your age and the place where you live.
- Your salary, title, employer, and employment history. (Although, keep in mind that lenders may consider this information for approving or rejecting you.)
- Soft inquiries.
There’s no single definitive answer to suggest what’s a good credit score but we’ve given you a framework to work with. Try staying in the good FICO and VantageScore zone to live a financially free and fulfilling life.
Use the ai credit repair- CoolCredit to get credit reports from all 3 bureaus and get expert help whenever and wherever you get stuck. Educate yourself by accessing a vast library of credit resources and navigate the world of credit more easily.
Q: How Do I Get a Good Credit Score?
A: To build a good credit score, make payments on time. Ensure that you keep your credit card balance low. Only apply for credit if you need it, and open accounts that will be added to the credit bureaus.
Q: How Long Does It Take to Get a Good Credit Score?
A: It takes about six months to get a good credit score. However, the chances are that it will most likely take you longer to get your credit score from good to excellent. In other words, the better the credit score, the higher the chances of getting your score improved, and vice versa.
Q: How Do I Find Out What My Credit Scores Are?
A: You can get your credit score through the CoolCredit app. The app will help fetch your score from all three bureau(s) - Experian, TransUnion, and Equifax. All you have to do is download the CoolCredit app, create your account, and watch your credit score automatically retrieved for you.
Q: Is 664 a Good Credit Score?
A: 664 is considered a fairly good credit score. However, the range of credit scores may vary depending on the scoring model, generally adopted by creditors or other financial entities. Rest assured, a good credit score ranges from 670 to 739. On the other hand, any score above 799 is considered excellent.
Q: What Is a Good Credit Score Range?
A: 670-739 is considered a good credit score range.