A credit score is a three-digit number that lenders use to assess the risk of lending money to a borrower. It is based on the borrower’s credit history and reflects the likelihood of them repaying a loan. There are two main credit scoring models used by lenders: FICO scores and VantageScores.
What is a good FICO score?
FICO scores range from 300 to 850, with higher scores indicating lower credit risk. A FICO score of 670 or higher is generally considered good, while a score of 800 or higher is considered excellent. Scores below 600 are considered poor.
What is a good VantageScore?
VantageScores range from 300 to 850, with higher scores indicating lower credit risk. A VantageScore of 661 or higher is considered good, while a score of 781 or higher is considered excellent. Scores below 600 are considered poor.
What is a good credit score by age?
According to Experian, in 2021 the average credit score in the United States is 714. However, credit scores can vary greatly by age. Here is a breakdown of average credit scores by age:
| Age | Average credit score |
|---|---|
| 18-24 | 679 |
| 25-40 | 686 |
| 41-56 | 705 |
| 57-75 | 740 |
| 76+ | 760 |
It’s important to note that these are just averages and individual credit scores can vary significantly from these figures.
What Factors Impact Your Credit Score?
There are several factors that can impact your credit score, including:
- Payment history: Late or missed payments can have a negative impact on your credit score.
- Credit utilization: This is the amount of credit you are using compared to the total amount of credit available to you. Using a high percentage of your available credit can negatively impact your credit score.
- Length of credit history: A longer credit history can have a positive impact on your credit score.
- Credit mix: Having a mix of different types of credit (e.g. credit cards, mortgages, personal loans) can have a positive impact on your credit score.
- New credit: Applying for too much new credit in a short period of time can have a negative impact on your credit score.
FICO® Score Factors
FICO scores are based on the following five factors:
| Payment history | 35% |
| Credit utilization | 30% |
| Length of credit history | 15% |
| Credit mix | 10% |
| New credit | 10% |
VantageScore Factors
VantageScores are based on the following six factors:
| VantageScore 3.0 | VantageScore 4.0 | |
|---|---|---|
| Payment history | 40% | 41% |
| Age and mix of credit | 21% | 20% |
| Percent of credit limit used | 20% | 20% |
| Recent credit behavior and inquiries | 5% | 11% |
| Total balances/debt | 11% | 6% |
| Available credit | 3% | 2% |
Why having a good credit score is important
Having a good credit score is important because it can affect your ability to borrow money and the interest rates you will pay on loans. For example, if you have a good credit score, you may be able to qualify for a mortgage with a low interest rate, which can save you thousands of dollars over the life of the loan. On the other hand, if you have a poor credit score, you may be denied a loan or be charged a higher interest rate, which can make borrowing more expensive.
How to Improve Your Credit Scores
- If you want to improve your credit score, there are several steps you can take:
- Pay your bills on time: Late or missed payments can have a major negative impact on your credit score. Make sure to pay all of your bills on time to avoid damaging your credit.
- Reduce your credit utilization: As mentioned above, credit utilization can have a major impact on your credit score. Try to keep your credit utilization below 30% of your total credit limit.
- Don’t apply for too much new credit at once: Every time you apply for credit, it leaves a hard inquiry on your credit report. Having too many hard inquiries in a short period of time can have a negative impact on your credit score.
- Keep credit accounts open: A longer credit history can have a positive impact on your credit score. If you have an older credit account that you don’t use anymore, consider keeping it open to help improve your credit score.
- Check your credit report regularly: Make sure to check your credit report regularly to ensure that all of the information on it is accurate. If you find any errors, dispute them with the credit bureau to have them corrected.
FAQ
What is a good credit score to buy a car?
A good credit score to buy a car is generally considered to be 661 or higher. However, some lenders may consider a score of 600 or higher to be good for car loans.
What is a good credit score to buy a house?
A minimum FICO credit score of 620 or higher is recommended when applying for a conventional loan. You may still qualify with a score lower than 620, but you may have a higher interest rate on your loan.
What can I get with a 700 credit score?
With a 700 credit score, you may be able to qualify for a variety of loans and credit products, including:
- Mortgage loans with favorable interest rates
- Auto loans with favorable interest rates
- Credit cards with low interest rates and generous rewards programs
- Personal loans with low interest rates
- What is an acceptable credit score?
An acceptable credit score is generally considered to be 660 or higher. However, credit scores can vary greatly depending on the lender and the type of credit product you are applying for.
How do you get an 800 credit score?
To get an 800 credit score, you will need to have a long credit history with a consistently high credit score. This typically requires a combination of good credit habits, such as paying your bills on time, keeping your credit utilization low, and avoiding applying for too much new credit at once. It may also require some time and patience, as it can take several years to build an excellent credit score.
