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What is a Good Credit Score?

Dec 18, 2024 | Personal Finance

Three Fast Ways You Can Improve Yours

There’s a lot of wiggle room in what is considered a good credit score, ranging from 300 to 850, but if your score is 700 or over, you’re doing fairly well. Anything over 800 is viewed as excellent. It’s possible to get an 850, but it’s very difficult.

Notably, most consumers’ credit scores fall in the 600-750 range, although 2020 saw a slight bump in the average FICO® Score☉, up seven points to an average score of 710. (1)

Which One Does My Lender Look At?

First, you need to know there are two kinds, and how they’re figured is different. For example, a FICO score between 800 and 850 is considered excellent, while VantageScore, the second credit bureau, regards 661 or higher as very good and anything over 780 as excellent. (2)

On the other hand, while FICO views scores of 670 or below as fair to poor, VantageScore views scores of 660 or below as fair, poor, or very poor.

While other credit scores are available, and some lenders may use their own scoring models, FICO and VantageScore are the most commonly used.

What Credit Bureau Is Likely To Get Me A Good Credit Score? 

No credit bureau is superior to another, and none will likely get you a better credit score. In fact, most lenders don’t seem to prefer one scoring model over the other, but a lender will likely look at only one scoring institution. (3)

FICO states that some 90% of all lenders use their scoring system when determining how risky a loan may be, but VantageScore reports that in one year, some 12.3 billion of their scores were used. 

It’s worth noting that VantageScore was developed by the three major credit bureaus—Experian, Equifax, and TransUnion—to offer a scoring model that’s more consistent than FICO and more helpful when evaluating the creditworthiness of someone with a shorter credit history.

How Is It Decided?

Man seated at a desk with a laptop

If you’re working to build your credit, it helps to know what a good credit score is and the areas of your spending that directly contribute to it. As we noted, FICO and VantageScore each have their own criteria for credit score models, but here are the most significant determining factors from each:

FICO

FICO uses five categories to determine your credit score. They are: 

Your payment history. This is the big one, worth about 35% of your final grade. If you’ve made all of your previous payments on time, this will help. It also looks at how many times you’ve made late payments or missed one altogether, the number of accounts you have been late or delinquent on, and how many times you were late.

How much do you still owe? This adds your outstanding credit balance and loans together and compares them to your total credit limit. Are your cards close to maxed out? This is known as a credit utilization score. A good score would be 30% or less, but 10% or less is ideal. Your debt has about a 30% impact on determining your score.

Length of credit history, or how long you’ve had credit. Your FICO score is calculated using the information on your credit report, which is determined by the time you’ve had credit. It accounts for 15% of your score. A more extended credit history has a positive influence. 

New credit. Have you applied for any credit cards or opened any new accounts lately? Every time you apply for a new card or loan, whether you get it or not, your potential lender looks at your credit score. This is called a hard inquiry. Unfortunately, every hard inquiry into your credit score drops your rating by 5-10 points, which will stay on your record for up to a year. It accounts for 10% of your FICO score. 

Credit mix, or how many cards, installment loans, finance company accounts, mortgages, etc., you hold. Your credit mix accounts for 10% of your FICO score. 

VantageScore

VantageScore uses six categories with different levels of influence to evaluate your credit information and calculate your credit score. If you’re wondering what a good VantageScore credit score is, examine your financial habits alongside these categories: 

Payment history: It’s a big deciding factor.

Credit utilization: It’s also a significant deciding factor 

Amounts owed: Influences credit moderately.

Length of credit history: It’s a big deciding factor.

Available credit: Less of a deciding factor. 

Recent credit behavior: Less of a deciding factor

Adjust your credit behavior along these categories to get a favorable credit score. For example, ask yourself how many credit inquiries you have made. (4) If several, slow down on your credit applications to stop hurting your credit further. 

What Is The Benefit Of Having A Good Credit Score

A good credit score can help you get better terms on the loan you’re applying for. It may even be the deciding factor on whether you get the loan or not. But generally speaking, the better your credit score, the lower your APR interest on that loan will be.

A good credit score can also mean the difference in whether the landlord will rent you an apartment. Some employers may look at your credit score before deciding if you will get hired or promoted. Even insurance companies use your score to set the rates on your home, auto, and life insurance premiums.

You may be surprised to learn that paying off a loan, for instance, can lower your credit score. Or paying off your credit cards and then deciding not to use them again. It’s a good idea to stay out of debt, but if FICO and VantageScore don’t see some monthly activity, you’ll likely get a lower score.

What are the Three Fast Ways to Improve?

Man with a good credit score smiling

After finding out what a good credit score is and the areas that credit bureaus consider in their calculations, here are three ways to improve your credit score:  

Make your payments on time, and try to pay more than the minimum when you can. A single late payment can hurt your score and stay on your report for up to seven years. If you think you’ll be late, contact your creditor immediately and try to work something out before the damage is done.

Keep your credit card balances low, also known as your utilization rate. You may not be able to pay them off but certainly do your best to pay them down well below your credit line.

Only apply for credit when you absolutely need it, not when you’ve seen something shiny and new you want. Remember, every new application you make creates a hard inquiry. And, while this in itself is minimal, enough of them in a short enough period can have a collective negative impact on your score. (5)

One More Step You Can Take

It’s possible you don’t have a good credit score because you’ve never had a credit card before. It would be worth getting one, even if its APR isn’t very favorable. Then, use that card for a recurring monthly payment, like a subscription to a streaming service, and pay it off in full each month.

Experian boosts your score by giving you credit for the utility and mobile phone bills you’re already paying regularly. Until now, those payments had no impact on your score. However, this website can help you grow your credit by paying your bills. Learn more — and see your FICO score for free — by visiting this website: Experian Boost – Improve Your Credit Scores Instantly for Free.

Get a Minute Loan Center Loan 

Besides getting a credit card, a Minute Loan Center loan can help immensely. Since you now understand what a good credit score is and how to get to it, with emphasis on the areas FICO and VantageScore focus on, it should be easier to achieve it. You can apply for a Minute Loan Center loan to help pay off other debts. Contact us for more information and help applying for a loan. 

SOURCES:

  1. DeNicola, Louis. “What Is a Good Credit Score?” Experian, 3 May 2021, www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/.
  2. Detweiler, Gerri. “What Is a Good Credit Score?” Credit.com, 2021, www.credit.com/credit-scores/what-is-a-good-credit-score/.
  3. Ibid
  4. White, Alexandria. “What Is a Good Credit Score and How to Get One.” CNBC, 19 Mar. 2021, www.cnbc.com/select/what-is-a-good-credit-score/.
  5. DeNicola, Louis. “What Is a Good Credit Score?” Experian, 3 May 2021, www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/.

The information provided is for informational purposes only and is not a substitute for professional financial advice. You should consult a credit counseling professional concerning the information provided and what should work best in your financial situation. And any action on your part in response to the information provided is at your discretion.

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