There is no definition of what a good credit score is. This is because there are different scoring models with different scoring ranges and every lender has their own standard of what’s considered “good” to them. Here at MyScoreIQ, we provide you with your FICO Score, the most popular credit score used in over 90% of U.S. lending decisions. In this model, a good credit score ranges from around 670 to 739, “very good” scores range from 740 to 799, and “exceptional” scores are anything greater than or equal to 800.

Your credit score is an indicator of your creditworthiness, which is the measure of how likely you are to pay back what you borrow. Whenever you borrow money, the institution you’re looking to borrow from wants to make sure that whatever they lend you will be paid back. The higher your credit score, the better chance you have of being approved for credit at lower interest rates.

Read on to learn more about:

• How Can a Good Credit Score Help You?
• FICO Score Ranges
• Why You Should Consider Credit Score Ranges
• How FICO Scores are Calculated
• How to Get a Good Credit Score
• How Long Does it Take to Get a Good Credit Score?

How Can a Good Credit Score Help You?

Higher scores mean that you pose less of a ‘credit risk’ to lenders. As a result, they may be more likely to extend credit to you at favorable terms. If you have a good credit score, lenders often charge you lower interest rates, which means that borrowing money costs less. If you’re looking at a mortgage, for example, you can save thousands with a lower interest rate over the lifetime of the loan.

FICO Score Ranges

FICO credit scores fall between 300 and 850. Knowing where you are on the credit score range can be helpful as you consider applying for new types of credit or if you’re working on your credit score before you apply for new credit.

Poor: 300-579

Poor credit scores make it difficult to secure new credit, like loans or unsecured credit cards, because it indicates a higher credit risk to a lender. If you can secure credit-building products, use them wisely. These credit products often come with higher interest rates and potential fees than other credit products. You may also be required to pay a deposit to access credit if you fall into this credit score range.

Fair: 580-660

A fair score can give you some access to better products, but you still need to examine all of your options between different lenders. With a fair credit score, you shouldn’t expect to get the best terms available.

Good: 670-739

With a good credit score, expect that you’ll have access to more options. Depending on other factors like your income and overall financial health, you may be able to secure a mortgage, though not with the most preferential rates. Consider loans with preapproval or prequalification options that will help you prepare for likely outcomes.

Very Good: 740-799

A very good credit score means that you pretty much have your pick of available credit products. You’re most likely to be approved for loans and credit cards that have better than average repayment terms like low-interest rates and fees. If a lender denies your application, it isn’t going to be because of your credit score.

Excellent: 800+

Since a perfect credit score is 850, there is little room for improvement here. Those with credit scores above 800 are offered the best repayment terms available and have access to most credit products. With a score in this range, expect to be approved for loans and credit cards with the lowest income rates.

Why You Should Consider Credit Score Ranges

Credit score ranges are important benchmarks to consider because they can help you decide when the right time to apply for credit is. Once you’ve reached the “very good” credit score range of say, 750 to 800, you won’t see too many differences in the quality of offers you’re getting. However, a similar increase in scores from the “fair” range of 650 to a “good” score of around 710, can make a huge difference in the types of credit and terms available to you. That being said, these credit score ranges are a good guideline that can help you shape your expectations and help you make any necessary adjustments before you decide to apply for a loan or a credit card.

How FICO Scores are Calculated

If you need to improve your credit score, it helps to understand how credit scores are calculated and why you have your current score. Once you understand the factors influencing your score, you can focus on the areas of your credit history that need improvement. Here’s a quick overview of the five factors that influence your score:

• Payment History (35%)
• Credit Utilization (30%)
• Length of Credit History (15%)
• Credit Mix (10%)
• Credit Inquiries (10%)

How to Get a Good Credit Score

If you’re looking to improve your credit score, here are some great ideas to start with:

• Pay your bills on-time. Payment history is the most significant factor on your credit report influencing your credit score. Missing a single payment or paying past the due date can bring your score down significantly. Showing that you pay back what you borrow on time reduces your credit risk and can help your score.
• Dispute errors on your credit report. If you see anything that doesn’t look right, contact your lender so that they can correct it. Sometimes it’s a simple error that can easily be fixed, or you may be required to submit documentation to get it straightened out. If you see accounts on your credit report that you didn’t open, that may be a sign of identity theft.
• Keep your credit utilization low. If you have a credit card with a $10,000 limit, you don’t want to max it out. Ideally, you don’t want to carry a balance higher than 30%, in this case, above $3,000, of the credit that you have available. If you exceed that, it may be a sign that you don’t know how to handle credit or that you rely on credit too much to make ends meet.
• Limit your hard credit inquiries. Every time a lender, employer, or insurance company checks your credit report, the credit bureaus make a note on your credit report that stays for up to two years. Each inquiry has the potential to reduce your score a little bit. When lenders see multiple consecutive inquiries, it can raise red flags. This may mean that you are opening lots of new credit accounts in a short period of time. The only exception is that most credit scoring models will let you shop around for a certain kind of credit product, like a mortgage or a car loan. If those similar inquiries are made within a short period of time, they’ll count as a single inquiry instead of multiple, separate ones.
• Don’t close your old credit accounts. Credit reports are designed to show your credit history. The longer that is, the better your score. It’s better to keep old accounts open and in good standing. Closing them can reduce your credit history and lower your score.
• Consider your credit mix. Lenders like to see that you can keep up with various credit types like installment loans and revolving accounts like credit cards. If you’re missing a specific type of accounts, and it makes sense to add one, consider increasing the diversity of your credit mix.

How Long Does it Take to Get a Good Credit Score?

The rate at which your credit score grows depends on your unique situation and the challenges you’re facing. If you’re just starting out with credit, it could take months of using introductory credit cards before you begin seeing improvements. If you have bad credit due to a history of late payments or bankruptcy, however, it can take years of good credit activity before previous derogatory remarks stop hurting your scores. Credit building is a gradual process that takes time and consistent effort, so prepare yourself for a marathon, not a sprint.