When you’re attempting to improve your credit score, it’s important to know how lenders categorize credit scores. That way, you can determine where yours should be to achieve your financial goals.

It’s great to bump your score up by 100 points. However, if you’re still in the “bad” category, it will be difficult getting approved for a loan, credit card, or mortgage.
What is a FICO Credit Score?
Your credit score is a three-digit number that represents your overall credit health. Lenders use your credit score to quickly evaluate how trustworthy you are when it comes to paying back a loan or credit card.
Although there are different types of credit score ratings, FICO is the biggest and most widely used credit scoring system. Your credit score takes into account various factors in your financial history and behavior. This includes payments on credit cards, loans, and other bills.
If you have a long history of on-time payments and you’ve been responsible with your credit, your credit score will be higher. This indicates to lenders that you are a reliable borrower.
By the same token, if you have a history of late or missed payments, your credit score will be on the lower end. Creditors will then be aware of the risk they’re taking in lending to you.
FICO credit scores range from 300 to 850. By using FICO scores, lenders can quickly assess a consumer’s creditworthiness without poring over their entire credit profile. For that reason, everyone from credit card issuers and insurance companies, to mortgage lenders and property managers use FICO scores.
How Are Credit Scores Calculated?
First, there are two primary credit score systems in the US:
- The VantageScore: competitor to FICO, created by the three main credit bureaus in 2006.
- The FICO Score: calculated by the Fair Isaac Corporation (FICO)® and used in 90% of lending decisions.
The three major credit bureaus, Experian, Equifax and TransUnion all collect financial information about consumers. This data is compiled into your credit report. The VantageScore or FICO algorithms are then applied to those reports to calculate your credit score.
Let’s look at the different elements that make up the calculation of your credit score.
Credit Utilization
Credit utilization is the amount of available credit that you actually use. This is presented as a percentage, and the lower your credit utilization is, the better your credit will be. According to FICO your credit utilization counts for 30% of your credit score, while VantageScore 3.0 puts credit utilization at 20%.
Payment History
Another major factor in your credit score is your payment history. This illustrates to creditors how consistent you’ve been with making payments, bills and other financial obligations on time. FICO considers payment history to account for 35% of your credit score. For VantageScore your payment history counts for 40% of its scoring model.
Length of Credit History
The longer your credit history is, the better. This is why it’s not a good idea to close an account even if it is unused. Those with thin credit history can benefit from credit building cards and services.
Credit Mix
The kinds of credit you have will also factor in to your overall credit score. Lenders prefer to see that a consumer can manage several types of debt. This is why having a mix of credit accounts – such as mortgage, loan, credit card or phone bill – can raise your score.
Recent Applications
Every time you apply for new credit, a hard inquiry is made on your credit history. This often takes a few points off your credit score. However, it can be built up again within a few months of good credit use.
FICO® Score Range: 300 – 850
So, how are FICO scores ranked? The categories might vary by lender, but FICO scores typically fall as follows:
Excellent credit: 800 – 850
You’re most likely to get approved for a loan or credit card. In addition, you’ll receive access to the very best interest rates and terms. The highest credit score you can have is 850.
See also: How to Get in the 800+ Credit Score Club
Very good credit: 740 – 799
You’ll still get some of the best rates when you apply for credit. In fact, some lenders consider 720 as the threshold for the lowest interest rates. So, it may not even matter if your score is any higher than that.
Good credit: 670 – 739
The average American’s credit score is 714, which falls into the “good” category. You probably don’t have many major negative items listed on your credit report. However, there’s room for improvement to make sure you get the best financing terms.
Fair credit: 580 – 669
Your rates in this category definitely won’t be the best available. This could end up costing you thousands of dollars, if not more, the next time you take out a loan or carry a balance on your credit card.
Poor credit: 300 – 579
You definitely have some negative items. You’ll likely have trouble getting approved for credit, whether it be a new card or a loan. If you do get approved, your rates will be extremely high.
The good news is, there’s plenty of room for improvement in the category. The bad news is that you’ll probably need that improvement to get approved for a loan at all. For example, the bare minimum score for an FHA home loan is a 580. So if you won’t be eligible if your credit is in this category.
FICO® Score Chart
You probably know where you fall into these credit categories, but how about everyone else in the country? At 54.7%, just over half the population has a score of 700 or above.
About 23% of people have a score between 600 and 699, and 22% of people have a score of less than 600. That means nearly a quarter of Americans either have poor credit or are on the border of dipping below the 579 threshold.
Why Good Credit Matters
It’s important to have a good credit score as high as possible because the higher your interest rate, the more money you’ll pay over time. That can really add up for high-value loans like cars or mortgages.
Let’s look at a quick example. Let’s say you have excellent credit and take out a mortgage for $100,000 over 30 years. If your rate is a low 3.92%, you’ll end up paying an additional $70,000 in interest payments.
If you think that’s a lot of money, wait until you see the next set of numbers. Bump that rate up to 5.92% for someone with a lower credit score, and they’ll end up paying over $113,000 in interest. That’s more than the loan itself! And it’s $43,000 more than the first person paid with a better interest rate.
Benefits of a Good Credit Score
There are plenty of reasons why having a good credit score is worth it. Primarily, your credit score will determine whether you can borrow money, and how much you’ll pay in interest to do so.
A good credit score can help you secure a credit card with a competitive interest rate and attractive rewards. Or it could make it easier for you to find approval for a competitive loan for a car, mortgage, or other large expense.
Insurance is another benefit of good credit. People with higher credit scores pay less overall for various types of insurance all over the country.
The High Cost of Bad Credit
Even if you’re not planning on buying a home anytime soon, the same principles apply to credit cards, car loans, student loans, and other loans. The lower your credit score, the more money you’ll have to pay. Plus, landlords and even some employers now do credit checks as part of their application processes.
With a bad credit score, you might have difficulty finding a home or even a job. Furthermore, if you have a financial emergency, you might be stuck with high-fee options like payday loans or title loans. The interest on these loans can add up fast and even cost you your car.
If you fall into one of the lower credit rankings, it’s time to start evaluating your credit reports. That way you can find out how you can improve that score and keep your financial opportunities wide open.
Industry-Specific Credit Scores
Now that you know what a good credit score is, it’s time to get more specific.
Traditional FICO scores from the popular scoring company Fair Isaac Corporation range from 300 to 850. However, there are actually several credit scoring models that lenders might use when judging your creditworthiness. These vary depending on what type of credit you’re applying for.
A few examples include versions specifically for mortgages, car loans, credit cards, and student loans. Each one will look at slightly different information that is more relevant to the exact type of credit you want.
Your Credit Scores Are Different Depending on What You Apply For
The credit scoring models for credit cards more heavily weigh your revolving payment history. However, the auto-version is going to pay more attention to your past car payments.
There are a couple of tricky parts that come with these alternative credit scoring models. The first is that you probably won’t know which credit scoring model your lender is going to use unless you ask.
Additionally, the credit score ranges are different from the traditional FICO model. Instead of ranging between 300 and 850, the industry-specific credit scores range between 250 and 900.
On the auto credit range, for example, you’ll want at least a 750 to get the best interest rates. So, you can see how the numbers vary slightly for each different model.
FICO vs. VantageScore
While FICO scores are the most popular ones used by lenders today, there are other companies competing in this space. The other major model is called VantageScore, which was actually created by the three credit bureaus.
VantageScore 2.0, which is still used by some lenders, calculates credit anywhere between 501 and 990.
The latest version, VantageScore 3.0, uses the same credit score range as FICO to reduce confusion, 300–850. As with FICO, the higher your VantageScore, the better your credit looks to lenders.
What else do lenders look at besides credit score?
Clearly, your credit score is a massive component of any financial application process. If you don’t meet certain minimums, there’s no way you’ll get approved or access the very best rates. That being said, lenders look at a lot of additional information beyond your credit score and credit report.
They also analyze your income level to make sure you can afford the loan amount you’ve requested. Even if you earn six figures, a lender may question your ability to make payments if you have too much credit card debt or the loan amount is too high.
Employment History
They also look at your employment history. Regardless of your credit score or income, most lenders want to see that you’ve been in the same job for the past two years. They even check your tax statements and pay stubs to confirm your earnings and often require proof of employment.
A lender might also want to know how much in cash reserves you have on hand. They’ll likely want to see bank statements. This is because the more savings you have, the more cushion you have to repay the loan even if you have a financial emergency. For example, medical bills or a lost job.
How to Get the Best Credit Score
Start by consistently paying all of your bills on time and in full. This is the best thing you can do for your credit score because it accounts for 35%—the biggest factor considered!
You should also order a free copy of your credit report to get an idea of what exactly is bogging down your score. Is there anything on there that’s incorrect or out of date? You might be able to dispute it and have it removed.
In the event you have multiple negative items, you could greatly benefit from talking to a credit repair company to help you clean up your credit history.
Credit Utilization Rate
Another important step you can take to improve your credit score is to manage your credit utilization rate. This means doing your best to keep credit card balances well below your credit limits. You should be aiming for under 30% credit utilization at the very least.
You might be able to lower your credit utilization by applying for a higher credit limit. You could also become an authorized user on a lightly used card with a high credit limit.
Avoid Closing Accounts
As we’ve mentioned above, closing unused credit accounts can actually lower your credit score. This is because closing an account will mean your total available credit will decrease, negatively affecting your utilization rate.
It’s worth keeping older credit accounts open, unless doing so is costing you too much in fees, or adding stress.
Limit New Applications
Try to avoid making several credit applications in a short time frame. These hard credit checks are likely to cause a temporary dip in your credit score. Several of them made in a short time can add up.
Monitor Your Credit
Part of building your credit score is being comfortable with monitoring your credit reports and disputing information that may be incorrect.
Get a Free Credit Consultation
Most companies, like Credit Saint, offer a free consultation. This allows you to ask questions about your specific situation to see exactly how they can help you.
Knowing your credit score and where you fall in the range can help you plan your financial future. No matter how bad your credit score is, you have the potential to improve your financial situation.
It might take a little time and effort, but it’s always doable. Professional credit repair companies that have been in the business for a long time have truly seen it all. Call them today and find out how they can help you improve your credit score.
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FICO Credit Score Range FAQs
What is a good FICO credit score?
According to the FICO credit score ranges, a good credit score is in the range of 670 to 739.
What is an excellent credit score?
An excellent credit score, according to the FICO credit scoring model, is 800 and above. Those with excellent credit generally have a pristine and long established payment history, with multiple types of credit and a low credit utilization ratio.
What is the average credit score?
The average credit score in the US is 714, according to Experian data from September 2021. This is based on credit scores using the FICO model.
How many people have a perfect credit score?
According to Experian, a mere 1.3% of FICO credit scores are a perfect 850.
What is a good credit score to buy a car?
If you’re looking to buy a car with a car loan, a good credit score is around 700. This means that if your score is just below that, you might face more questions about your credit history.
Remember that the exact definition of ‘good’ credit will also vary from between lenders.
Why is my credit score low?
Your credit score could be low for numerous reasons. In addition to a late payments, outstanding debt or a poor credit utilization ratio, having little to no credit history can also result in a low score.
There may also be mistaken items on your credit report that are dragging your score down.
Your credit history can also become thin if your credit report shows no activity for a long stretch of time, as items can ‘fall off’ your report.
How can you start building credit history?
Building credit history from scratch might seem intimidating, but it doesn’t have to be stressful.
- Start slow. It’s important to remember that it takes time to build good credit. Don’t overdo it by applying for numerous credit cards and taking out a loan all at once.
- Find a secured or student credit card. An effective way to build credit from scratch is to find a secured credit card. These cards require a deposit that functions as your credit limit.
- Maintain a low balance. Use your first credit card lightly and always ensure that you can pay off what you spend within the required period.
- Pay on time. Making on time payments is the most important factor in building good credit.