A high credit score can help you qualify for the best interest rates and terms on loans and credit cards. But what scores are considered “good enough”? Here we break down what scores fall into that range, and how you can build your credit.
Credit scores are undoubtedly important – they determine our eligibility for a variety of financial products, including credit cards. Credit scores also determine the interest rate customers are charged for using lines of credit on cards and loans.
What’s a good credit score? According to FICO, the average credit score is 716 – up five points from the previous year. But if your credit score is higher than average, you could reap the benefits of lower interest rates and higher lines of credit on cards. Here’s what you need to know about good credit scores and how credit scores are calculated.
What is a good credit score for a credit card?
Scores in the range of 670 to 739 are good scores and may be good enough for most people. Scores over 740 will get you top rates. And while over 800 is an exceptional score, it won’t get you much more.
Any score below 579 is not where you want to be. From 580 to 669 is considered a fair score, but you’ll get better rates with a higher score.
Credit card issuers define “good credit” differently, so you sometimes can’t know until you apply whether you’ll be approved for a credit product or get the best rate. However, you can get a good general idea of your credit from your credit score. The two biggest creators of credit scores are FICO and VantageScore. Here’s how they break it down.
Credit Score Ranges
|Score range||Credit rating|
|Very poor||300–579||Very poor||300–499|
Why good credit scores matter
While credit scores help determine your availability of credit and the rate you’ll pay to access it, what it really measures is your statistically proven likelihood of defaulting on the money you borrow. The greater the risk, the lower your score and the more you’ll pay to access credit – if you can access any credit at all.
In August 2021, the average interest rate on a subprime credit card – or a card for customers with subprime credit – was 25.88%, while the APR on a low-interest card was 12.96%.
If you carry an average balance of $3,000 month to month on an average subprime credit card, expect to pay about $64 in interest charges. Compare that to $32 in interest charges for an average low-interest credit card, and you’re paying twice as much in interest. Low-interest credit cards are typically only available to people with excellent credit scores, and this example demonstrates the importance of building good credit.
FICO vs. VantageScore
FICO and VantageScore are very similar consumer credit-scoring models, both using a scale of 300 to 850 when calculating credit risk. As shown above, what FICO and VantageScore both consider “fair” or “good” credit differ slightly, with FICO using a score of 670–739 to describe good credit and VantageScore using 661–780 for the same category.
However, FICO and VantageScore weigh credit profiles of consumers quite differently. FICO lays out the percentage out of 100% of the different factors considered when calculating a credit score and VantageScore uses “reason codes” to create a hierarchy of importance from the factors.
FICO calculates credit scores by weighing these factors:
- 30% is amounts owed
- 10% is new credit
- 15% is credit history length
- 10% is mix of credit
- 35% is payment history
Meanwhile, VantageScore ranks factors’ importance in this order:
- Extremely influential: credit usage, balance and available credit
- Highly influential: credit mix and experience
- Moderately influential: payment history
- Less influential: credit age and new accounts
Credit score factors
Payment history makes up 35% of your total FICO score and is considered “moderately influential” to your VantageScore. To earn the best score, your goal should be to never miss a payment date on any of your accounts, whether they be a loan, mortgage or credit card. If a bill comes due and you find that you can’t pay it, it’s always best to call the company and work out a mutually beneficial payment plan to avoid outright missing a payment.
Up next is your credit utilization, or how much of your available credit you are using. This makes up 30% of your FICO score and is extremely influential on your VantageScore. Here’s how it works: If you have a $5,000 credit limit and charge $1,000, your credit utilization is 20%. As soon as you pay your statement, your credit utilization drops. People with the best scores are in the single-digit percentage points in this category. For most of us, something in the range of 20%–25% will keep your score in good shape.
Length of credit history
The remaining three pieces are not weighted as heavily, but they are still important. At 15% for FICO and considered “less influential” with VantageScore is credit history, which is not to be confused with your payment history. This measures the length of your oldest credit line and the average age of your accounts, so try to keep your oldest accounts open if possible.
New credit and credit mix
Coming in at 10% with FICO and “less influential” for VantageScore are new credit accounts. Just like closing old accounts, you want to be careful about opening new ones. Opening new accounts creates uncertainty and can signal increased risk to lenders, which will bring your score down, at least in the short term.
As for credit mix – called credit experience by VantageScore – this is really where VantageScore and FICO differ. FICO only considers credit mix as 10% of your credit score while VantageScore weighs it as “highly influential.” This area accounts for the variety of credit extended to you, including credit cards, mortgages, student loans and car loans.
See related: 13 bad credit habits you need to break now
How to build good credit
Approximately 62 million Americans have no credit data to score or are considered “thin files” (credit files with too little data to score). When just starting your credit score journey, it can be difficult to access financial products to build credit if you don’t even have a credit history established.
Some easy ways to establish a credit history include:
- Get a secured credit card. With a secured credit card, you put up a deposit and the issuer gives you a credit line based on your deposit. Then you use the credit card as normal, making payments and charging purchases on a rotating basis while the issuer reports to all three credit bureaus – Equifax, Experian and TransUnion.
- Use non-bureau reporting information such as utility payments, rent payments or bank account history with a program like Experian Boost or UltraFICO to supplement the data in your file.
- Become an authorized user on a trusted person’s credit card. If you have a strong enough personal relationship with someone like a family member, ask them if they could add you as an authorized user on their account. You don’t even have to use the card, as long as the primary account holder uses the card and pays it on time, you’ll build credit history.
Credit score FAQs
How long does it take to get a credit score?
It can take anywhere from three to six months after opening an account for your first credit score to establish.
How do I find my credit score?
The easiest way is to go to AnnualCreditReport.com and request a copy of your credit report from the three major bureaus: Experian, Equifax and Transunion. Some credit card issuers like Discover even offer free FICO score monitoring to cardholders.
What’s not factored into credit scores?
According to VantageScore, among the factors not considered when calculating your credit score are: race, ethnicity, age, occupation, employment history, religion, nationality, gender, residential location, salary, total assets and marital status.
What are the 5 levels of credit scores?
FICO calculates credit scores and categorizes the scores into five levels:
- Exceptional: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
Having a good credit score takes work. As long as you pay your bills on time and even connect non-traditional accounts like utilities and rent to your credit report, you can build your credit up to a good range. Do this long enough and you’ll see that your score can even rise into “very good” or “exceptional” with FICO.
With a good credit score, you have access to new credits and accounts like mortgages, car loans and the best credit cards, accompanied by the best APRs and terms available.