What Is a Good Credit Score and How to Achieve It?
What is a good credit score, and why is it so important?
Well, let’s put it like this. Will you get approved for that car loan you need? Is the bank going to greenlight your mortgage? These are some of the things that depend on your credit score.
Your FICO rating three-digit figure reveals your creditworthiness and represents your current financial health. The range of credit scores goes from poor to excellent. The better your score is, the better the impression you leave to financial institutions, landlords, and potential employers.
Now is as good as ever to get informed about your credit rating and how to improve it. Read further and learn all about good credit scores and their benefits.
What Is a Good Credit Score?
According to the FICO score range chart, good credit starts at 690 and goes up to 719. Anything under this range is considered fair, while scores above this threshold are classified as excellent. It’s important to note that the rating scale is between 300-850.
What Are the Benefits of a Good Credit Score?
Do you know why everyone is interested in what a good FICO credit score is these days? Well, having a good and excellent score earns Americans numerous benefits. Here are some of them:
- Low-interest rates
- More negotiating power
- Better chances to get approved for a loan
- Better chances to get approved for a credit card
- Higher credit limits
- Higher chances to get approved for rentals
- Better rates on car insurance
- Access to unsecured credit cards
- Low or no security deposits on utilities.
What Is a Good Credit Score to Buy a House?
For an FHA loan, you need a score of at least 500 and a 10% down payment. VA, FHA 203K, and conventual loans are accessible to those with credit scores of 620 or more. Americans with FICO scores equal to or higher than 640 qualify for USDA loans.
Please note that having the minimum grade for qualification doesn’t guarantee that lenders will approve your application. Every institution has its individual definition of what is a good credit score for a home loan. Plus, they may have other qualification criteria besides the size of this three-digit number. For example, your employment history, down payment, and even marital status can affect their final decision.
Remember, an ideal credit score affects three aspects of buying a home.
First, the interest rates fall as your score goes higher. Second, the types of loans available to people with a top credit score are numerous. Finally, the percentage of the required down payment is drastically lower. Americans with excellent credit may not need a down payment at all. By contrast, those with over and under 580 points usually need a down payment of 3.5% and 10%, respectively.
What Is a Good Credit Score to Rent an Apartment?
A grade of at least 620 in the FICO score chart is considered enough for renting an apartment. Still, the exact requirements may vary depending on several factors. Each landlord or rental agency has individual qualification criteria. While some landlords may be open to scores of 600 or lower, others may consider 700 to be the lowest qualifying one.
One factor is related to the property’s location. Homes in hot markets tend to come with stricter requirements. This means that anything under 700 won’t be enough for you to get approved. Also, your competition plays a role too. For example, if several prospective tenants have similar profiles, the owner or rental agency is likely to rent out the property to the person with the best credit score.
What Is a Good Credit Score to Buy a Car?
People within a FICO score range of 660 or above have an excellent chance to get approved for a car loan. This doesn’t mean that those with a lower grade won’t qualify. They will, however, get worse terms and higher interest rates.
What Is a Good Credit Score to Loan a Car?
There is no country-wide and official minimum credit rating requirement for approving car loans. Different lenders have different qualification criteria, plus your location plays a role too.
Experian reported that 30% of car loans approved in 2020 were to people with a FICO grade of 600 or under. The average interest rates for these varied between 4.29% and 20.49%.
Credit Score Levels
FICO has four main credit score rankings regarding American’s rating – bad, fair, good, and excellent. The scoring starts at 300 and goes up to 850. However, some charts further sectionalize the scores into five levels – poor, fair, good, very good, and exceptional.
We must mention the VantageScore credit score grades here, as well. This is the rating widely used by financial institutions for establishing creditworthiness. The major credit bureaus developed it, and it mostly overlaps with the FICO score ranges.
Regardless of the credit rating scale, a score of at least 690 points is considered positive.
What Is Considered Excellent Credit?
People with a grade of at least 740 points can say that they have an excellent credit score. Around 25% of people in the US have a score of 740+. Those with 800 or more have an exceptional rating. About 21% of Americans can boast such a grade.
People with excellent and exceptional ratings have minimal chances of defaulting. Lenders, therefore, give them the best possible rates and offers.
What Is Considered Poor Credit?
According to the FICO credit score ranges, grades between 300-629 fall into the red. Very poor rating, however, is anything under 579 points. About 16% of American adults have a FICO credit score within this range.
People with poor credit applying for loans, rentals, etc. usually need to provide a safety deposit or pay a fee. Plus, financial institutions tend to reject their applications altogether. As for access to credit cards, the secured ones remain the most realistic option for Americans within this credit scores range.
What Is a Good Business Credit Score?
A good business score, according to the Experian and Equifax charts, is 76+ and 90+, respectively. Dun & Bradstreet considers good anything over 80 points, while FICO SBSS’s threshold for a good rating stands at 160+.
Unlike the personal credit score chart that goes between 300-850, business scores mostly range from zero to 100. The only exception here is FICO SBSS, whose rating goes up to 300. A good rating here reveals a low likelihood of late payments or defaults. Businesses with a good score, therefore, qualify for various loans and are considered more trustworthy.
What Is a Good Credit Score for a College Student?
The credit score ranges are identical for everyone. Meaning, students with a score between 690-712 are in the green. Still, this isn’t an easy task for students because they have a short history, and many of them have student debt.
Let’s not forget that Americans owe over $1.5 trillion in education debt, per the latest student loan stats. This significantly lowers their FICO ratings. For students to achieve robust financial health, they must start working on their credit history as early as possible. They should also utilize credit cards for students and avoid generating debt early in their adult lives.
How to Check My FICO Score?
Now that you know what is considered a good credit score, it’s time to learn how to check your rating without lowering it. Americans have the right to request a free report from the three major credit bureaus Experian, Equifax, and TransUnion. You can get three reports without extra charges every 12 months.
Depending on your bank and credit card, you can get reports every month alongside your statement. Besides these, there are also non-bank sources such as monitoring tools and websites. For example, we have services like Mint, PrivacyGuard, and IdentityForce.
Potential landlords and employers are other alternatives you can consider. They can make credit pulls for running background checks. Just make sure to confirm that they make soft inquiries because hard inquiries hurt your FICO score.
What Factors Affect Credit Scores?
Seven factors can make or break a person’s credit score. They include your:
- Payment history and especially missed payments
- Personal debt
- Age and state of credit history
- Credit utilization ratio
- Number of hard inquiries on the credit record
- Relevant public records like bankruptcy
- Number and size of recent credit accounts
So, make sure you understand these. Otherwise, you may damage your rating with irresponsible behavior and ruin your chances of getting approved for loans altogether.
How to Obtain a High Credit Score?
To improve your FICO grade, you must consider the credit score factors that affect it first. Above, we explained those factors, such as personal debt, late payments, and credit utilization. Now, it’s time to put them into action so they can positively affect your FICO rating.
- Avoid missing payments at all costs. Pay all bills on time, every month.
- Pay off personal debt or consider a balance transfer to lower it.
- Maintain credit card debt under your spending limits and keep credit utilization under 30%.
- Avoid applying for different loans and mortgages within a short period. Every hard inquiry lowers your score by around 5 points. Note that payday loans generally don’t show up on your credit report, provided you pay them off on time.
- Frequently check your FICO score and dispute any unauthorized credit pulls — credit repair facts show that inquiries are among the most common successfully disputed items.
Final Thoughts on High Credit Scores
It’s a fact that the FICO score plays a critical role in the life of American adults. That’s why it’s essential to understand what a good credit score is and how to achieve it.
Your access to unsecured credit cards, desirable car loans, and mortgages significantly depend on your financial health. So, make sure to regularly check your FICO rating and react fast to deal with any unwanted drops.
As your three-digit number improves, you’ll witness your options and opportunities in life expand too.