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What is a Good Credit Score?

Image of Anita Thomas Chief Marketing Officer
Credit scores can be confusing, especially if you are establishing credit for the first time. Learn what a good (and bad) credit score is, how it is determined, and the different credit scores that may be reviewed by potential creditors. First, let’s start with defining a credit score.

What is a Credit Score?

A credit score is a grade that indicates how good you are with managing debt and payments, and helps lenders decide if lending to you is worth the potential risk.

Your credit score is a number that falls within a range, from low (poor) to high (excellent). The FICO® Score (the most popular and commonly used) has a range of 300-850. The lower your score, the more of a credit risk you are. The higher your score, the lower the risk, and the more likely you are to get approved for credit and qualify for better rates.

There are three major credit reporting companies that collect information and calculate your credit score. They are: Equifax, Experian, Transunion.

How is a Credit Score Calculated?

Each one of the credit companies uses their own unique equation for calculating your credit score, but the primary factors that impact your score don’t really change. When it comes to FICO, credit scores are calculated based on five different categories:

  1. Overall payment history
  2. Amount of debt you owe
  3. Length of your credit history
  4. Your credit mix (i.e., types of credit)
  5. New credit

As demonstrated in the pie chart below, the FICO® Score assigns a certain percentage to each factor that adds up to your total score. Some factors are weighted more heavily than others, like your “payment history” (which indicates how well you manage to pay on time) and “amounts owed” (which reveals whether or not you’re overextended in total debt compared to your income and ability to pay).

PIe chart of what is in a FICO score
Fair Isaac Corporation (2019, November 19). What’s in my FICO® Scores? Retrieved from

Now let’s take a closer look at these categories , payment history, amounts owed and length of credit history, and breakdown what each means.

Payment History

This refers to your payment habits on previous loans, bills, or credit cards. Have you made expected payments on time? Do you pay your utilities on time? (Some companies have started to capture this.) When you don’t make good on your promises to pay, whether it’s the light bill, a medical bill, retail store credit card, major credit card, cell phone, student loans, etc., it will likely get reported to the credit reporting companies.

Negative items can stay on your credit report for up to seven years. Bankruptcies can stay on your report for up to ten years. Ouch!

Amounts Owed

The amounts owed is critical because it highlights the levels of debt you have and whether you are potentially overextended. If the total amount of all your loan and credit card balances is high, this could signal that you may have difficulty managing your monthly obligations; lenders may not be inclined to lend to you if that is the case.

Also, if you’ve heard of a debt-to-income ratio, the amounts owed category is part of that evaluation. Creditors look at your income level compared to the outstanding debt you owe to determine if you are maintaining a healthy balance that allows you to easily manage not only your current payments, but any new loan amounts that may be up for consideration. Sometimes lenders may approve a new line of credit or loan in a lesser amount than you’ve requested, if it means keeping your debt-to-income ratio manageable.

Length of Credit History

The length of credit history is based on the average age of all your accounts. Your oldest loan or line of credit will have a big influence on this. Coming in at 15% of your total score, your credit history length can be a strong contributor to your total score. If you are a young borrower, check out our article on building good credit while in college for tips on how to begin building a solid credit history. There are a few things you can do to help this along, but Google defines history “as a whole series of past events connected with someone or something,” so establishing a lengthy credit history just takes time.

Credit Mix

The different types of accounts you have on your credit profile is known as the credit mix. The combination can consist of installment accounts (such as auto loans, mortgages, student loans) and revolving lines of credit (such as credit cards and retail store cards). The more responsible experience you have with different types of credit, the better. Of course, that takes time to build.

New Credit

While the new credit category only accounts for 10% of your score, it is best not to have too many newly opened accounts back to back (or in a short period of time). One risk you face is bringing down the average age of all your accounts. And as we’ve covered above, length of credit history makes up 15% of your score so length of credit history and new credit work hand-in-hand. If you’re trying to get approved for a new loan, this is something you’ll want to be particularly sensitive to.

What is Considered a Good Credit Score?

Broadly speaking, a good credit score will be somewhere between 670 to 739. You’re likely to find that if your score lands in this range, most lenders may be inclined to lend to you (assuming you can also demonstrate proof of income and employment history). But what ultimately determines a good credit score is up to each lender or creditor. After all, they are the ones who will decide whether or not to take a risk on you by lending to you, giving you a credit card, etc.

Each individual lender may have a different score they use as a threshold for qualifying, and an even higher standard to determine who qualifies for some of their best rates.

What is a Bad Credit Score?

A credit score that falls below a 580 is considered a poor (or bad) score. However, let’s put some things in perspective. Credit scores that fall between around 580 and 669 are considered “fair.” And as the name implies, a fair credit rating does not exactly get lenders excited. Yes, some creditors may work with individuals that have fair credit. This is especially true for some credit cards geared toward helping individuals rebuild—or jump start—their credit profile. This is also true for more aggressive loan products with higher interest rates that take into account the greater credit risk that comes with a fair credit rating.

What is a FICO Credit Score?

FICO stands for Fair Isaac Corporation which is the first company that developed a universal scoring model. The FICO® Score methodology is used by roughly 90% of all lenders in the U.S. today. While other scores have been developed, FICO remains the industry leader. FICO Scores fall on a range of 300 to 850.

Something that’s very important to understand, however, is there are many different FICO® Scores, not just one. There are different scores used by various types of lenders and products. For example, mortgage lenders may need a scoring model that is quite different than a model used by a credit card company to make a decision on credit risk.

As needs have evolved and grown over the years, so has the FICO Score. Just know that when it comes your score, it may be good enough for Lender A, but may not meet minimum thresholds for Lender B.

What is a Good FICO Credit Score?

The FICO credit score ranges are listed below in the pyramid chart. For a score to be considered “good” it typically needs to fall in the 670-739 range. There is also a “very good” range that is 740-799.

FICO Pyramid of scores and ranges

What is a Vantage Credit Score?

The VantageScore® (established in 2006) is similar to the FICO® Score. Both rank your credit from low to high on a numeric range. The VantageScore 3.0 goes from 300 to 850, whereas their primary model (still used by some lenders) has a range of 501 to 990.

What really makes the VantageScore different is that it claims to help more consumers who would otherwise be ignored by the FICO model. This includes individuals who are new to credit or who do not need to use credit very often. And this population is around 30 to 35 million consumers. The VantageScore was originally created by the three major credit reporting companies, Equifax, Experian and TransUnion.

What is a Good Vantage Score?

A good VantageScore® is considered to land above 660, and if your score is over 780, that is typically considered excellent credit. But like beauty, this is in the eye of the beholder. Every lender may review a number of other factors when considering whether they will approve you for a loan or line of credit, and your numeric score may be only one part of the equation.

How Often is a Credit Score Updated?

Credit scores are updated every 30-45 days, but this will depend on your creditor. Most companies will report information to the credit reporting companies each month, but there are no industry standards or requirements that dictate exactly when updated information is to be sent. Every creditor may have different schedules in play when it comes to relaying information. If you are monitoring your credit report to see improvements or any notable changes, it is best to assume that it may take more than 30 days to see any changes occur.

How Do I Find Out My Credit Score?

Today, there are a number of options to help you stay on top of your credit score. Many credit cards will feature your credit score on your monthly statement, and most of the major banks with checking and savings accounts offer to provide your score as a value-added service. Even student loan lenders such as Sallie Mae and Discover offer a free or low-cost monthly monitoring service so you can take control of your credit. But if you want to dig more in-depth into your credit health, you may need to work with the credit reporting companies directly.

To clarify, by law you are entitled to one free report every 12 months from each of the three credit reporting companies. If you’re interested in achieving and maintaining good credit, you should definitely take advantage of this. But getting a free copy of your credit report does not necessarily mean it will include your actual credit score. In fact, unless you subscribe to a fee-based monitoring service, or have access to your score through one of your creditors, you will very likely be in the dark on what your actual credit score is.

One way to get your score is through a new creditor that you’ve submitted an application to (for a loan or credit card). This is especially true if you’ve ever been denied credit. If/when this happens, you are entitled to a copy of your credit report through one of the credit reporting companies so that you can better understand what contributed to the denial, and so you can challenge any items on your credit report if needed.

In addition to helping you stay aware of the items on your credit report, credit monitoring tools can help you stay alert on any inaccurate or fraudulent activity on your accounts. And it will keep your buying power top of mind for the future. For example, a delinquent payment on a car, mortgage, or credit card may negatively impact your credit score. Whereas frequent on-time payments may help illustrate that you are a responsible borrower. Your credit report will reflect these habits, and you can see the types of behavior the credit companies are looking at to calculate your score.

If you’ve been struggling with a low credit score and you’ve been working hard to raise it, monthly monitoring may help keep you motivated as you see that number get higher and higher!

How to Challenge Items on Your Credit Report

Let’s say you have found something on your credit report that is wrong. This could be a reported past-due payment that you have the receipt for, or a credit card that was opened in your name without your knowledge (as in cases of identity theft). As a consumer, you have the right to challenge these items. The Federal Trade Commission (FTC) can provide you with tips and sample letters on how to dispute an item and correct errors on your credit report.

Final Thoughts

No matter which credit score (FICO or Vantage) your lender uses to help determine if they should take a risk on you, they will put a lot of confidence in the information from your credit profile. So pay your bills on time, don’t borrow more than you can afford to pay back, and don’t max out your credit cards just because you have available credit. Monthly monitoring can help increase your awareness and understanding of credit reporting, credit scores, and how it all works.

What to do next?

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