What Is a Good Credit Score?


Despite the impact that credit scores can have, many people misunderstand what they are and how they are calculated.

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Your credit affects every aspect of your life in ways that you may not expect. Having a good credit score unlocks lower rates for mortgages, car loans, and some types of insurance, as well as lower credit card rates.

Some employers also use credit scores for advancement and hiring decisions, so having a good credit score often impacts your earning ability over the course of your career.

This guide will cover the basics of understanding what a credit score is and is not, how to determine whether you have good or bad credit, and what you can do to improve your existing credit scores.

What is a credit score?

First, let’s talk about what a credit score is and is not. At its most basic, it’s a number that indicates how likely you are to repay your debts. Creditors use this number to decide whether or not to extend credit to you and under what terms.

For example, your bank or credit union will look at your credit score before approving you for a mortgage. If you are approved, the rates you qualify for are directly tied to your credit score. Higher credit scores mean lower interest rates and vice versa.

Your credit scores are not a direct reflection of how much money you make. People with a low income can have an excellent credit score, and high-income people can have a poor credit score.

Likewise, your credit scores are not tied to a particular bank or credit card company. Banks and credit card issuers do pull your credit scores to decide whether or not to lend to you. But, the credit scores are supplied by third-parties, not the lenders themselves.

How is your credit score calculated?

Your credit score is based on a number of different factors. Here’s how it works:


The Fair Isaac Corporation (FICO) calculate your credit scores based on their internal algorithms.

They base these credit scores on data from the credit bureaus about your past and current financial actions as reported by your current creditors. Things like length of credit history, how much you owe, and payment history are all a part of the calculation. However, the exact formulas that FICO uses are a secret.

How often does your credit score change?

Your credit score is constantly changing based on the actions you take. It’s common for it to vary month to month or even day by day as your creditors report new information.

To put it another way:

Your creditors report information about your payment history and current financial obligations to the credit bureaus.

  • Credit scorers then use this information along with other data about you to calculate a score.
  • The credit score serves as a way of “grading” your financial responsibility.
  • New creditors then use this grade to determine how likely you’ll pay up in the future. The higher your grade, the more likely you’ll be approved for loans, credit cards, and get the best rates.

The good news is that there are specific actions you can take that will boost your credit scores in the future if they aren’t where you want them to be today. To get an idea of where you stand, you need to know where your credit scores fall in the range of potential credit scores.

What are the different credit score ranges?


There are a few different types of credit scores available right now. In general, the only ones that really count are your FICO scores.

There are different types of FICO scores used throughout the mortgage, auto, and insurance industries, but the main thing to keep in mind is that FICO is the major player when it comes to credit scores. When your lender talks about qualifying, 9 times out of 10, they are referring to your FICO score.

The FICO score range is from 300 to 850.

Some other credit scoring models and their ranges are:

  • PLUS Score – Experian developed this credit score, and it only uses data found on your Experian credit report. Lenders do not use this credit score. Instead, it’s meant to educate consumers on their credit risk levels. The PLUS score ranges from 330 to 830.
  • TransRisk Score – as the name suggests, this score was developed by TransUnion. It is used to predict risk for new credit accounts, not your ability to pay current accounts. The TransRisk score range is from 100 to 900.
  • Equifax Score – this is also an educational tool, much like the PLUS score. The range is from 280 to 850.
  • VantageScore – the VantageScore is the only other credit scoring model used by lenders. The three major credit bureaus created it to compete with the FICO score. The current version of the VantageScore has the same range as the FICO: from 300 to 850.

What is considered a good credit score?

The answer to whether or not it’s “good” or “bad” depends on what kind of credit you are trying to obtain and the maximum interest rate that will make you happy.

good or bad

For something relatively small like a personal loan or a credit card, there are a wide range of credit scores that could be considered good.

Mortgage lenders, on the other hand, typically require that your average FICO score pulled from all three credit bureaus is no less than 640 – and with a 640 credit score, you’ll be looking at high interest rates that add hundreds of dollars to your mortgage payments.

If you’re looking for general guidelines on what constitutes a good credit score versus a bad credit score, these point ranges are the typical credit scores from bad to excellent credit:

  • Excellent credit: 781 and above
  • Good credit: 661-780
  • Fair credit: 601-660
  • Poor credit: 501-600
  • Bad credit: 500 and below

See also: What Is the Average Credit Score in America?

If you’re looking for an idea of what kind of credit score you’ll need in various situations, read on.

What credit score is needed to rent an apartment?


Landlords typically pull your credit history to assess the risk of new tenants before offering a lease. It’s not only to assess your current financial situation; i.e., how much money you currently owe compared to your income.

It’s also to see if you have any outstanding collection accounts, including non-payment of rent from a prior apartment.

In general, you need to have a credit score of at least 620 to be granted a lease. If you can’t meet this minimum, you’ll likely need a cosigner on your rental agreement. So a person with a 615 credit score would have problems, but if you have a 635, you’re likely in the clear.

In areas where rental properties are in high demand, you may also have to pay a larger deposit. You may also have to come up with both the first and last month’s rent before your lease is approved if your credit scores are low (below 620). In extreme cases, you may be forced to agree to automatic payments taken directly from your checking account to qualify.

What is a good credit score to buy a car?

Car dealerships are famous for their “no credit, bad credit, any credit!” slogans to get people in the door to buy a new car.

However, the great deals you see advertised on TV are usually reserved for people with top-tier “super-prime” credit ratings. The general breakdown of interest rates for new car loans looks something like this:


If your credit scores fall into the deep subprime or subprime categories, there is a risk that you won’t be able to get financing at all. However, if you manage to get financing, the rates will be significantly higher, as you can see by the list above.

If you want the best rates on a new car, aim for a credit score of 680 or above. If you want to be approved for a car loan with a decent rate, aim for a credit score of at least 620.

What credit score is needed to buy a house?

As stated earlier, if you’re looking to purchase a new home, your credit will be scrutinized. Several factors go into qualifying for a home loan, and your credit score is only one of them.

That being said, if you want to qualify for a traditional mortgage, you’ll need a credit score of at least 640. The best mortgage rates are reserved for people with a 720 credit score or higher.

Some exceptions may be made for people who are getting FHA loans or VA loans. FHA loans only require a 580 credit score, and VA loans have no credit score minimum for mortgages.

However, these numbers are deceptive because neither the FHA nor the VA actually provides loans. Instead, they insure loans to the banks that do the actual lending – primarily providing risk mitigation in case of a default.

Even with this insurance in place, you most likely won’t be approved for a VA or FHA loan with a credit score that’s below 620.

What credit score is need to get a low-rate credit card?

Credit cards are the most wide-ranging of all the credit types you might qualify for. If you want a great interest rate, no annual fees, and lots of perks, you’ll need a 720 or better. If you’re just looking for a solid credit card with a good rate, you can qualify for a decent credit card with a 640 credit score.

How can I find out my credit score?

Plenty of credit card companies offer free FICO scores to customers nowadays. Some even offer a free credit score to non-customers. You can also purchase your FICO score at FICO’s website, MyFICO. Your VantageScore can be purchased from VantageScore’s website.

Keep in mind that some credit cards and banks provide credit monitoring. However, these credit scores may not be your FICO or VantageScore. Be sure to verify what kind of credit score you are getting before you pay for it.

The only other way to get your credit score is to apply for a credit card or loan. In your acceptance (or denial) letter, you will generally receive your credit score and how it factored into the decision to approve or deny your credit.

This is the least recommended way to get your credit score, as there is no way for you to improve your credit score before you are denied credit if there are problems.

How can I improve my credit score?

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If your credit score isn’t where you need it to be to qualify for the types of credit you deserve, there are several things you can do to improve your credit scores over time:

  • Pay your bills on time. Keeping current with your payments is the best way to build credit. Even six months of on-time payments can make a significant impact.
  • Lower your debt to income ratio. The more debt you carry relative to your income, the lower your credit scores will be. Try to pay off credit cards and pay down loans to give yourself some breathing room.
  • Pay down maxed-out credit cards. Credit utilization is a big factor. Using all of your available credit is a red flag to lenders that you are high-risk. So pay down any balances until you are using one-third or less of your available credit limit.
  • Remove errors from your credit report. Any negative items on your credit report that aren’t accurate will hurt your chances of getting approved for credit. This includes late payments, charge-offs, collection accounts, and more. Dispute any errors you find, or hire a reputable credit repair specialist to get the job done for you.

Understanding how to get a good credit score is an important first step to taking control of your financial freedom. Keep in mind that it takes time to build credit and that you as a consumer have rights to help you preserve the accuracy of your credit scores.

Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.