What is a Good Credit Score?

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I never knew you had more than one credit score! After reading this, I realize I have some work to do so I can have a good credit score.

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.

NOTE: Read this before applying for a credit card!

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!

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20 thoughts on “What is a Good Credit Score?

  1. Mrs. Adventure Rich

    Interesting, I didn’t realize the scale shifted for the various purchases (house, car, credit card), but it makes sense considering the scale of each purchase. Thank you for sharing!

    Reply
  2. Steveark

    Zero house debt, zero car debt and zero credit card debt. Cards have been and always will be paid in full each month. Credit score 830. You can have a nearly perfect credit score with no debt.

    Reply
    1. femmefrugality Post author

      Awesome job! Yes, paying off credit cards in full every statement cycle is a great way to go. Sounds like you’ve got it down, but just a head’s up to everyone else out there—know thyself! Not everyone has the self-discipline to do this.

      Reply
  3. Mel @ brokeGIRLrich

    Clearing up inaccuracies is the worst. For years, I had one of my mom’s cards listed on my credit report. It had a really high limit and it was maxed out all the time. It was killing my score and we had no idea for years!

    Reply
  4. Budget on a Stick

    I didn’t really track my credit score until Discover started automatically giving it every month with my bill. Unfortunately it was after we had paid off our consumer debt and don’t have a need for a loan.

    It’s always hovered around 790 and 815. We only have 2 credit cards from 2006 and have a mortgage.

    From what I’ve heard closing credit cards only dips you a little in the short run. So if you aren’t going to need your score for over a year or so it’s best to close extra cards.

    Reply
    1. femmefrugality Post author

      Congrats on the awesome score! And paying off all the debt!

      I’m not so sure about the closing of the cards thing. From what I understand, opening a card gives you a really small, typically short-lived dip. You can recover quickly because you’re adding to your credit limit–as long as you’re using that credit responsibly and keeping your credit utilization low.

      Closing cards lowers your overall credit, and if you carry any debt, it’s likely to raise your credit utilization, which isn’t good. If it’s an older card, in particular, this can be a negative as another big factor in your score is average age of account. If you close a twelve-year-old card, you’re going to lower that average age, which also isn’t ideal.

      Reply
  5. Chonce

    Sometimes I wonder why there is such a large variance of needed credit scores. You would think that a 700+ could help you with just about anything, but even THAT isn’t good enough sometimes. I know having a credit score is important, but I’m also trying really hard to focus more on paying cash vs. using credit for everything that I possibly can. Thanks for sharing!

    Reply
    1. femmefrugality Post author

      I hear you, Chonce! I’m going on a little bit of a detox after racking up points for some trips lately. Chase’s 5 cards in 2 years rule is motivating me. Plus, it’s just good to get back to the basics of money management and not have it so complicated—spend out of checking–don’t have to worry about due dates on my normal, everyday purchases.

      Reply
  6. Sarah (Smile & Conquer)

    Interesting post, I like how you broke down what is considered a good credit score for different purchases. I wish we were taught more about the importance of credit scores in school, making just a couple of small mistakes can really impact your ability to get on the right financial path and often people don’t even know what they’re doing is wrong.

    Reply
    1. femmefrugality Post author

      Truth. So much of it can seem counter-intuitive until you’ve gone out of your way to figure it out!

      Reply
  7. Brad - MaximizeYourMoney.com

    Paid off my home three years ago and my credit score has been slowly dropping since. Glad I won’t be needing credit again in the future. Hopefully it won’t drop low enough to impact my insurance rates. A bit annoying that a debt-free person can be looked at as a higher risk than a heavy borrower.

    Reply
    1. femmefrugality Post author

      I guess it depends on the credit history and which kind of debt you have. Someone with high credit utilization probably isn’t faring well. But then on the other hand I was debt free for three years and still had a score creeping up on 800 during that time frame–after having established credit, but not utilizing it. So many variables, and so many formulas to calculate it.

      Reply
  8. Liz@ChiefMomOfficer

    My credit is frozen, so my credit score is irrelevant to me. But I do check it every once in a while just out of curiosity, and it’s still over 800. I find that interesting, because I have only one credit card (with a relatively low limit) and a mortgage. I don’t really understand why it’s high, but I’ll take it!

    Reply
    1. Femme Frugality

      It can be confusing! I really think this is one topic that could benefit from cursory financial education over or in addition to coaching early in life, because even when you’ve educated yourself, there are so many variables and formulas. Mine was pretty high after only having a single loan even though I wasn’t that old at the time–and that was after I had to ask my lender to start reporting it!

      Reply
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