Your credit score is a three-digit number that indicates to lenders how likely you are to repay your debts. A good score means you’re a pretty safe bet and makes borrowing much easier.
So what exactly is a good score? It depends on the scoring system, but Fair Isaac’s FICO system—one of the most commonly used—considers 670 to 739 to be good and 740 to 799 to be very good. (Scores range from 300 to 850.)
On VantageScore 3.0, one of the most recent versions of another well-known scoring model, a good score is 661 to 780. (There is no ‘very good’ on this one.)
What Is a Credit Score?
A credit score is a summary of your credit report, a regularly updated record of all your borrowing activity. A score is generated each time it's requested, serving as an up-to-the-minute snapshot of your credit health.
Each of the three major credit reporting bureaus in the U.S. keeps a credit report on you, so there can be variations in the reports and the resulting scores, even within the same scoring system.
But having a good credit score is a consistent way for lenders to know you're a creditworthy borrower. They assume that if you’ve paid your bills in the past, you're probably going to meet your future obligations. That's why you're more likely to have a good credit score if you've managed your credit well for the past several years.
Your score impacts your ability to get a loan or credit card and can affect less obvious areas of your life too. Some prospective employers will look at your credit reports when you’re applying for a job. Or a landlord may check it before renting an apartment to you.
On the flip side, not having a good credit score can affect much more than your ability to buy a new home or car. It may raise your insurance rates or hurt your ability to finance a new cellphone.
Applying With a Good Credit Score
With a good credit score, you’re more likely to be approved for a loan and get a lower interest rate. Be aware, though, that it’s not a guarantee. Creditors consider other factors too.
Your income, employment, and level of debt are usually considered, and your application could be denied if you’re lacking in any of these areas.
If you don't have a good credit score, it doesn't necessarily mean you won’t be able to borrow. But if you are approved, the lender may charge you a higher interest rate or ask for a bigger down payment. If you're applying for utilities or other monthly services, you may have to pay a security deposit to get your services established, or the creditor or service provider may require you to have a co-signer before you can be approved.
Do You Have a Good Credit Score?
Each scoring system weighs things a little differently, but your payment history, how much available credit you are actually using, and how long you’ve been borrowing are important factors in calculating your score.
You can check your FICO score at a number of free credit score websites such as CreditKarma.com. You can also go directly to the three credit bureaus—Experian, Equifax, or Transunion—or myFICO.com. (You may or may not be charged, depending on which of these you choose and whether you request your reports or other services as well.)
It's possible to have a good credit score with one bureau and a fair credit score with another. This can happen if you have a debt collection or other negative account that appears on one credit report but not on the others.
Once you know your credit score, you’ll know where you fit in the mix. If you don't have a good one, check your credit reports to learn more about which accounts are hurting you. (You are entitled to get your credit report at each of the three bureaus once a year, free of charge, at annualcreditreport.com) If errors are weighing down your credit score, make sure to dispute them with the credit bureau.
And more importantly, don’t panic. Just make a plan. It won’t happen overnight, but you can typically improve your credit score by reducing high balances, paying off past-due accounts, and building a positive payment track record.