For credit scores that typically range from 300 to 850, aiming for a credit score in the mid to high 600s or higher is generally considered good. Scores in the high 700s and 800s are considered excellent. In fact, around a third of consumers have FICO Scores ranging between 600 and 750, and an impressive 48% achieve even higher scores. In 2023, the average FICO® Score☉ in the U.S. stood at 715.
While lenders establish their own criteria for lending decisions and interest rates, a better credit score generally unlocks access to credit cards and loans with more favorable interest rates and terms. The two primary credit scoring models, FICO® Score and VantageScore®, have slightly different ranges, but rely on similar scoring factors.
Let’s delve deeper into what constitutes a good credit score, the factors influencing your credit, and strategies to boost your credit scores.
Decoding a Good FICO® Score
Base FICO® Scores range from 300 to 850, with the “good” credit score range falling between 670 and 739.
FICO, a leading credit scoring agency, develops various types of consumer credit scores. They offer “base” FICO Scores, widely used by lenders across industries, as well as industry-specific scores tailored for credit card issuers and auto lenders. It’s worth noting that FICO’s industry-specific credit scores have a different range: 250 to 900. However, the “good” range of 670 to 739 remains consistent across both base and industry-specific FICO® Scores. Scores exceeding this range are categorized as very good or exceptional.
Understanding a Good VantageScore Credit Score
The latest VantageScore 3.0 and 4.0 credit score models utilize a range of 300 to 850, mirroring the base FICO Scores. In this model, a good score falls between 661 and 780.
VantageScore, another prominent credit scoring agency, doesn’t offer industry-specific credit scores. While earlier VantageScore models (1.0 and 2.0) had a range of 501 to 990, these are not commonly used by lenders today.
Key Factors Influencing Your Credit Scores
Several common factors impact your credit scores across both FICO and VantageScore models. These factors generally fall into the following categories:
FICO and VantageScore differ slightly in their approach to weighting the relative importance of these categories.
FICO® Score Factors Explained
FICO uses percentages to indicate the general importance of each category. However, the precise percentage breakdown for your individual credit score depends on your unique credit report. FICO considers scoring factors in this order of importance:
VantageScore Credit Score Factors Explained
VantageScore ranks factors based on their general influence in determining your credit score. The specific influence, however, is still tied to your individual credit report. VantageScore’s factors, ranked by influence, are:
| VantageScore Credit Scoring Factor | Importance |
|---|---|
| Payment history | Extremely influential |
| Total credit usage | Highly influential |
| Credit mix and experience | Highly influential |
| New accounts opened | Moderately influential |
| Balances and available credit | Less influential |
Information Not Considered in Credit Scores
It’s important to note that both FICO and VantageScore models explicitly do not consider certain types of information when calculating your credit scores:
What Constitutes a Good Credit Score for Buying a Home?
To improve your chances of mortgage approval and secure a lower interest rate, it’s advisable to aim for a credit score in the “good” range or higher—a FICO® Score of at least 670.
The minimum credit score needed to buy a house can vary from around 500 to 700, depending on the specific mortgage loan type and lender. Many lenders for conventional mortgages require a minimum credit score of 620. Different types of mortgages have varying credit score requirements:
| Minimum Credit Score for Government-Backed Mortgages |
|---|
| FHA home loans |
| USDA loans |
| VA loans |
Remember, your credit score significantly impacts the interest rate and repayment terms of your mortgage. Lenders assess your credit score to gauge your risk as a borrower. While it might be possible to get a mortgage with bad credit, improving your score before applying for a mortgage is generally more advantageous.
What Is a Good Credit Score for Purchasing a Car?
While there’s no fixed minimum credit score to buy a car, a VantageScore of 661 or higher is generally considered a good starting point. Higher credit scores typically translate to more favorable auto loan terms.
Auto lenders perceive lower credit scores as higher risk. Applicants with poor or fair credit often face higher interest rates and potentially lower loan limits. If your score isn’t ideal, consider working to improve your credit before you buy a car.
The Landscape of Different Credit Scores
The existence of various credit scores stems from the fact that credit scoring companies continuously refine and market their scores to lenders.
Lenders utilize credit scores for crucial lending and account management decisions, such as loan approvals and credit limit adjustments. They have the flexibility to choose which scoring model best suits their needs.
FICO and VantageScore develop and sell distinct credit scoring models, both periodically releasing updated versions – much like software updates.
These newer models often incorporate technological advancements or shifts in consumer behavior. Lenders can then opt to adopt these newer models or stick with older versions already integrated into their systems.
VantageScore’s Diverse Credit Score Offerings
VantageScore develops a generic tri-bureau scoring model. This means a single model can assess credit reports from all three major consumer credit bureaus (Experian, TransUnion, and Equifax).
VantageScore’s journey began in 2006 with VantageScore 1.0 (no longer offered). In 2017, they launched VantageScore 4.0, the first generic credit score to incorporate trended data, tracking balance and credit utilization rate changes over time.
VantageScore unveiled its VantageScore 4plus™ model in May 2024. This model, unlike its predecessors, allows creditors to ask consumers to link a bank account and share banking data. With consumer permission, VantageScore 4plus; can factor in banking data to recalculate scores.
| Recent VantageScore Credit Score Versions |
|---|
| VantageScore 3.0 |
| Only considers data from a credit report |
| Can consider additional data with your permission |
| Considers trended data |
FICO’s Range of Credit Score Models
In 1989, FICO pioneered credit scoring models based on consumer credit reports. While recent FICO® Score versions share names like FICO® Score 8, FICO tailors different versions for each credit bureau.
FICO offers three primary types of consumer FICO Scores:
- Base FICO Scores: Designed for any lender type, ranging from 300 to 850. They predict the likelihood of a consumer falling behind on any credit obligation.
- Industry-specific FICO Scores: Tailored for auto lenders (auto scores) and card issuers (bankcard scores). These scores predict the likelihood of delinquency on these specific account types, with a range of 250 to 900.
- FICO Scores using alternative data: Models like UltraFICO® and FICO XD incorporate alternative credit data, ranging from 300 to 850. UltraFICO® can consider linked deposit account information, while FICO XD can score individuals using non-traditional payment history from other databases, such as telecom or utility payments.
FICO industry-specific scores build upon a base FICO® Score. FICO periodically releases new score suites, such as the FICO® Score 10 Suite, including base FICO® Score 10, FICO® Score 10 T (with trended data), and industry-specific scores.
Lender Choice in Credit Score Usage
Lenders have the discretion to choose which credit reports to request and which credit score(s) to utilize. It’s often unclear which report or score a lender will use, and their preferences can evolve.
The positive aspect is that most FICO and VantageScore credit scores rely on the same foundational information from your credit reports. They all aim to predict the likelihood of becoming 90 days overdue on a bill (generally or for a specific type) within 24 months.
Consequently, the same factors influence all your credit scores. While monitoring multiple scores might reveal variations due to scoring model and credit report analyzed, they generally trend in the same direction over time.
Why a Good Credit Score Matters
A good credit score can significantly facilitate achieving your financial goals. It can be the deciding factor in loan approvals, particularly for major loans like mortgages or car loans. It also directly dictates the interest rates and fees you’ll incur upon approval.
For instance, consider a 30-year, fixed-rate $350,000 mortgage. The difference between a 620 and 700 FICO® Score could mean a monthly payment difference of $138.58. This translates to nearly $50,000 in interest savings over the loan’s lifetime with the better score.
Beyond lending, credit scores impact non-lending decisions, such as apartment rentals.
Your credit reports can also play a role in employment decisions (some employers may review them, though not scores) and insurance premiums (in most states, insurance companies may use credit-based insurance scores).
| Average Mortgage Rates Based on FICO® Score |
|---|
| FICO® Score |
| 620 |
| 700 |
| 840 |
Source: Curinos LLC, December 6, 2024; assumes a $350,000 mortgage and 30-day rate-lock period
Strategies to Improve Your Credit Scores
To improve your credit, concentrate on the underlying factors influencing your scores. The fundamental steps are quite clear:
Other factors, like increasing the average age of your accounts, can also benefit your scores. However, this often requires time rather than direct action.
Regularly checking your credit scores can offer insights into improvement areas. For example, checking your FICO® Score 8 from Experian for free provides an overview of how lenders perceive your creditworthiness:
You’ll also gain a score profile overview, highlighting factors positively and negatively impacting your score.
Navigating Credit Scores When You Have None
Credit scoring models cannot generate scores for credit reports lacking sufficient information.
For FICO Scores, you need:
- An account at least six months old
- Account activity within the past six months
VantageScore can score credit reports with at least one active account, even if only a month old.
If you are unscorable, you can:
Understanding Credit Score Fluctuations
Your credit score can fluctuate for various reasons. It’s normal for scores to shift as new information is added to your credit reports.
Your credit scores may increase if:
- Negative items are removed from your credit report
- You decrease your credit utilization rate
- You pay off or settle collection accounts
- You consistently make on-time payments
Conversely, your credit scores might decrease if:
- A payment becomes 30 days past due
- Your credit utilization rate increases
- You apply for new credit
- You file for bankruptcy
Some actions can have unexpected effects. Paying off a loan, for example, could temporarily lower your score. This might occur if it was your only installment loan or the only loan with a low balance, altering your credit mix.
Credit scoring models use complex calculations. A single event’s point impact is not fixed; it depends on your entire credit profile.
For instance, a first-time late payment might significantly drop the score of someone with a flawless payment history, signaling a potential change in financial behavior. However, for someone with multiple past late payments, a new late payment might have a smaller impact.
Proactive Credit Report and Score Monitoring
Checking your credit score before applying for new credit helps gauge approval chances and potential terms. Regular monitoring allows you to proactively improve your scores and potentially save significantly on interest costs.
You can monitor your FICO® Score and Experian credit report for free, with daily updates and real-time alerts for suspicious activity. A free account also offers tools like Experian Boost and insights into your credit history and FICO® Score.
