What is a good credit score and how to get one
Credit scores range from 300 to 850. Those three digits might seem arbitrary, but they matter — a lot. A good credit score is key to qualifying for the best credit cards, mortgages and competitive loan rates.
When you apply for credit, the lender will review your credit report to determine your eligibility based on this information, which includes that three-digit number known as your credit score.
That magic number tells lenders your potential credit risk and ability to repay loans. Credit scores consider various factors, such as payment history and length of credit history from your current and past credit accounts.
There are two main credit scoring systems: FICO and VantageScore, and they aren’t created equal. FICO Scores are more valuable, as lenders pull your FICO Score in over 90% of U.S. lending decisions.
Below, CNBC Select explains what is a good credit score for FICO and VantageScore, how good credit can help you, tips on getting a good credit score and how to check your score for free.
THE RUNDOWN: GOOD CREDIT SCORES
- What is a good credit score?
- How a good credit score can help you
- How to get a good credit score
- How to check your credit score for free
WHAT IS A GOOD CREDIT SCORE?
Credit score ranges vary based on the credit scoring model used (FICO versus VantageScore) and the credit bureau (Experian, Equifax and TransUnion) that pulls the score. Below, you can check which credit score range you fall into, using estimates from Experian.
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
WHAT FACTORS INFLUENCE YOUR CREDIT SCORE
Credit scores are calculated differently depending on the credit scoring model. Here are the key factors FICO and VantageScore consider.
- Payment history (35%): Whether you’ve paid past credit accounts on time
- Amounts owed (30%): The total amount of credit and loans you’re using compared to your total credit limit, also known as your utilization rate
- Length of credit history (15%): The length of time you’ve had credit
- New credit (10%): How often you apply for and open new accounts
- Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on
- Extremely influential: Payment history
- Highly influential: Type and duration of credit and percent of credit limit used
- Moderately influential: Total balances/debt
- Less influential: Available credit and recent credit behavior and inquiries
HOW A GOOD CREDIT SCORE CAN HELP YOU
A good credit score can help you receive better-than-average APRs from lenders and increased approval odds for credit. With good credit, you have better chances at qualifying for a mortgage, lease or car loan.
Many of the best credit cards require good or excellent credit. If you want to benefit from competitive rewards, annual statement credits, balance transfers and more, you’ll need at least a good credit score.
If you want to take advantage of all the Chase Sapphire Preferred® offers, for example, such as 25% more value on points redeemed for travel via Chase Ultimate Rewards®, you’ll need good or excellent credit. And if you want to get out of debt with a balance transfer credit card, such as the Citi Simplicity® Card, you’ll also need good or excellent credit.
Even if your credit score falls within the good range, that is not a guarantee you’ll be approved for a credit card requiring good credit. Card issuers look at more factors than just your credit score, including income and monthly housing payments.
HOW TO GET A GOOD CREDIT SCORE
About six in 10 Americans (64%) worry that their credit score will prevent them from achieving a financial goal, according to CreditWise from Capital One’s Financial Milestones survey. If you have poor or fair credit, follow these tips to help raise your credit score.
- Make on time payments. Payment history is the most important factor of your credit score, so it’s key to always pay on time. Set up autopay or reminders to ensure timely payments.
- Pay in full. While you should always make at least your minimum payment, we recommend paying your bill in full every month to reduce your utilization rate (your total credit card balance divided by your total available credit).
- Don’t open too many accounts at once. Each time you apply for credit, whether it’s a credit card or loan, and regardless if you’re denied or approved, an inquiry appears on your credit report. This temporarily dings your credit score about five points, though it’ll bounce back within a few months. Try to limit applications as needed and shop around with prequalification tools that don’t hurt your credit score.
HOW TO GET A FREE CREDIT SCORE
There are dozens of free credit score services available that offer your free FICO Score or VantageScore. Here are some popular free credit score resources.