You probably know that having a good credit score is key to getting low mortgage rates and credit card interest rates. But what exactly constitutes a good score? That’s where the credit score ranges come in. Credit score ranges let consumers know how different credit scores stack up and which scores qualify as good or excellent, poor or average. No matter your credit score, a financial advisor can help you get your finances in order. Find a great one with SmartAsset’s free financial advisor matching service.
What is a Credit Score?
A credit score is a number that indicates your perceived credit-worthiness in the eyes of credit rating companies, banks, and others. If you have a history of paying all your bills on time and in full and you’re only using a small percentage of the credit available to you, you should have a high credit score. If you’ve experienced missed bills, bankruptcy, defaults, collections or other negative credit events then your score will be lower.
The most well-known provider of credit scores is FICO®. However, each of the three credit reporting bureaus, Experian, Equifax and Transunion, has its own take on your credit score, known as a VantageScore. Think of it as a modified version of your FICO® score that’s based on the credit bureaus’ scoring models and on the information the bureaus have about your credit history.
There are also different FICO® credit scores for bank cards, auto loans and more, and different versions of the FICO® score. That’s why a single person can have several credit scores. Different bureaus may treat credit events or authorized user accounts differently, so you may have excellent credit according to your Transunion credit score but still be in the “good credit” range with your Equifax score.
What are the components of a credit score? Payment history makes up 35% of the credit score. A further 30% is based on the debt you’re carrying and the credit available to you. The length of your credit history makes up 15% of your credit score. In addition, 10% stems from whether or not you have any new lines of credit. This is because new credit is viewed unfavorably by credit bureaus, who tend to be suspicious of customers who are taking on too much debt in a short time. Finally, 10% of the credit score stems from the type of credit you have.
Credit Score Ranges
Now that we’ve covered why credit scores are important and what goes into making a credit score, let’s take a look at the credit score ranges. The average credit score in the U.S. has risen in recent years but we’re still far from a world in which everyone has excellent credit.
The sheer number of credit scores makes it hard to name a definitive cut-off for good credit. Some credit scores max out at 750, others at 850 and others at 990. A lender who is assessing your credit-worthiness for, say, a mortgage, will look at several different scores to get a sense of the likelihood that you will pay back your debt on time.
Check out the charts below to see sample credit score ranges. For scores that max out at 850, a score of 700 or higher is considered good. If you’re unsure whether your credit score will get you the lowest mortgage rates you can always reach out to a mortgage broker.
|FICO® Credit Score Ranges|
Ways to Improve Your Credit Score
If you want to get a loan, open a bank account or get a credit card, you want to have the best credit score possible. If you’re looking to improve your credit score, there are a few things you can do:
- Pay off bills on time. This is one of the most important aspects of your credit score, so make sure you are staying up to date on any and all bills you owe each month
- Keep balances low. While it is important to use your credit cards to prove you can pay them off, make sure to keep your balances relatively low. Generally you want your balance each month to be less than 30% of your total available credit.
- Don’t get too many cards. Don’t get new credit cards just because you can get a free gift or because the deal looks too good to pass up. Only open new cards as needed.
- Don’t close cards. If you don’t use a card anymore, that’s fine, but don’t close the account. Just keep the card in a drawer.
- Deal with inaccuracies. There could be mistakes on your report dragging down your score. Deal with those.
There isn’t any foolproof plan to raise your credit card in a short time frame, so don’t fall for anyone telling you that’s possible. Just follow these general rules and be smart, and you could see your score rising over time.
Credit scores range from 300 to 850. A credit score is used by financial institutions when people do things like apply for loans or open new credit cards. While it’s always a good idea to pay your bills on time and in full and keep your credit utilization ratio low, experts generally agree that chasing a credit score of 850 is not the best use of your time. You don’t need a perfect credit score to get access to competitive rates on mortgages and other forms of credit.
Tips for Financial Planning
- If you want help managing your finances and getting the best possible credit score, consider using a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
- A good credit score is important when buying a house. See what that process might look like with our free mortgage calculator.
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