This post has been compensated by CreditRepair.com.
Any time you apply for credit, the lender is going to take a look at your credit history and credit score. A good credit score can be the difference between abysmal interest rates and manageable interest rates. Better rates can save you a ton of money over the course of repayment.
You don’t just have one credit score, though; you have many. There are several systems your lender may use to compute your score. On top of that, you have different scores depending on which product you’re applying for. For example, when you apply for an auto loan, your history with auto loans is typically weighted more heavily than if you were applying for a mortgage.
What is a good credit score, then? Well, today we’ll delve into the answer. We’ll be looking exclusively at FICO scores, though you should note that some creditors will pull your Vantage score. Most run off of the FICO model, though.
What is a good credit score when buying a home?
When you’re taking out a mortgage, a Good credit score usually falls between 680 and 699.
You’re likely to be offered even better interest rates if you have a Very Good credit score, which is typically in the 700-759 range.
But the best rates are usually reserved for those with an Exceptional credit score. The magic range for this rating is between 760 and 850. (Eight-hundred fifty is the highest credit score in the FICO model.)
What is a good credit score for auto loans?
Thinking about taking on a car note? In the auto lending industry, a good credit score is referred to as “Prime.” There is also a “Non-Prime” category, and finally a “Subprime” category. If you’re in the latter, you either want to work on getting your score up or buy in cash—the interest rates will be crushing.
A prime credit score usually falls between 661 and 850.
While non-prime scores are in the 601-660 range, you’re going to have a hard time getting approved by a traditional lender with a bearable interest rate if your score is below 620.
What is a good credit score when applying for a credit card?
Many lenders will pull something called your FICO Bankcard score when you apply for a credit card. This score actually goes all the way past 850 up to 900.
A Good Bankcard score is traditionally considered to be between 680 and 749.
An Excellent Bankcard score will help you get approved for even more exclusive cards. These are usually the ones that have mega rewards benefits. You typically fall into this category if your Bankcard score is 750 or above.
How to Find Your Credit Score
There are a lot of services out there offering “free” credit scores. Typically, you have to sign up for advertorial emails in order to access this score. Be careful, though. If you read the fine print, these scores are typically estimates, and may not be accurate.
They may also be based off of your Vantage score, which, as we’ve already established, only a small amount of lenders actually use.
If you want to get your FICO score and already have a credit card, odds are you can easily access it simply by logging into your account online.
If you don’t already have a credit card, you can find it for free through Discover.
How to Improve Your Credit Score
Not happy with your number? There are a few things you can do.
First, you need to check your credit report to make sure all the information on it is accurate. You are entitled to get a copy of your credit report from each of the three credit bureaus—Experian, Equifax and TransUnion—once per year.
If you find inaccuracies, you can go through the process of cleaning it up yourself, or you can get a trusted third-party who cleans up inaccurate credit reports for a living, like CreditRepair.com, to do it for you.
If you’ve checked your credit report and everything’s accurate, there may still be something on there that you’re not happy about. Maybe a hospital sent your medical bill to collections without notifying you. Maybe you lived through a natural disaster and were too busy trying to put your life back together to remember the due date on your latest credit card statement.
If something like this happened to you, you can try writing a Goodwill Letter to get the negative line item removed. It’s not guaranteed to work, but it is a fairly simple process.
If the information is all accurate and you don’t have an extenuating circumstance that would justify removal, you just have to work on establishing good credit habits moving forward. Building your number back up can take some time, but if you’re consistent, it should work. Negative information only stays on your report for seven years max.
Here are three of the big things you can do to show you’re a responsible borrower:
- Pay on time. If you’re more than 30 days late on a bill, that can show up on your credit report. If you’re dealing with medical debt, consider applying for financial assistance. You should also request to be put on a payment plan you can afford.
- Keep your debt burden low. A big factor used to determine your credit score is your debt-to-credit ratio. If you have a $14,000 limit on your credit cards but you only owe $1,000, your debt-to-credit ratio is decently low. If, however, your limit is $1,000 and you’re carrying that same $1,000 balance, your ratio is incredibly high. This does not bode well for you when calculating your credit score.
- Pay off debt, but don’t close your cards. If you have debt, pay it off. If you’re paying off credit card debt, it can be tempting to close them down after you’ve achieved your goal. Don’t. If you only had one credit card with a $14,000 limit and paid it off, your debt-to-credit ratio is looking pretty awesome. If you shut it down, you now have $14,000 less in credit, which is going to raise your ratio—not a good thing.
Do you have experience improving your credit score to get it into the “good” range? Leave your story in the comments!