Your credit score is a numerical value between 300 and 850 that reflects your ability to manage credit and debt effectively. The number is based on your credit report, which is a comprehensive look at your financial habits over the years, including whether you made payments on time and paid off loans in full.
Whether your credit score is deemed good can impact your ability to obtain credit, including where you can access certain types of credit like a mortgage or car loan and what type of interest rate you’ll qualify for. Beyond just accessing credit, your credit score may also influence your eligibility to rent a home, whether you’re required to pay a deposit on utilities, or how much you’ll pay for a life insurance policy. With credit scores influencing so many of your future financial decisions, there are steps you can take to help ensure yours falls on the higher side of the range.
Here’s what we’re going to cover:
- What is considered a good credit score?
- What impacts your FICO credit score?
- What can keep you within a good credit score range?
- The benefits of having a good credit score
- Oportun: Affordable lending options designed with you in mind
Key takeaways
- A credit score above 670 is considered good, and scores over 800 are deemed exceptional, on the common FICO® scale.
- You can improve your credit score by making payments on time, keeping credit utilization low, and only applying for the credit you need.
- Having a good credit score means you may qualify for favorable loan terms, which include better interest rates and different types of credit.
What is considered a good credit score?
Based on FICO standards, a credit score above 670 is considered good. FICO assigns ratings per the table below.
| Credit Score | Rating |
| <580 | Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| 800+ | Exceptional |
Borrowers with good, very good, and exceptional scores tend to be eligible for more financial products, including credit cards and loans, and receive more favorable interest rates than those with credit scores in the poor or fair categories.
What impacts your FICO credit score?
Five key factors impact your credit score, each based on your credit report and weighted according to importance.
Payment history (35%)
Payment history is the single largest factor that makes up your credit score, so making payments on time can help change your score for the better. A history of missed or late payments could result in a lower score. Many financial institutions report your payments, whether on time or late, to the three credit reporting bureaus. It’s possible that phone companies, utilities, landlords, and others will also report to the bureaus.
Credit utilization (30%)
Credit utilization is a measure of how much credit you’re using compared to the overall credit that’s available to you. For example, suppose you have one credit card with a credit limit of $5,000 and a balance of $1,000. In that case, your credit utilization is 20% (1,000/5,000). Keeping credit utilization under 30% is typically viewed positively by lenders.
Length of credit history (15%)
How long you’ve been managing credit is of interest to potential lenders. A longer credit history typically results in a higher score. If you’re brand new to credit, it can take about six months to build your credit score from scratch.
Mix of credit (10%)
Credit mix refers to the different types of credit you use. It includes revolving credit, like credit cards and lines of credit, and installment loans, like mortgages, auto loans, or personal loans. Effectively managing several types of credit can show you’re a responsible borrower and boost your credit score.
Pending applications (10%)
Also referred to as “new credit,” your pending applications can reflect how risky you are as a borrower. Submitting many applications for credit in a short period could make you appear riskier than someone who only applies for credit once.
What can keep you within a good credit score range?
The following steps can help you improve your credit score and give yourself the best chance of maintaining a good one:
Make timely debt payments in full
Since payment history is the largest factor in your score, paying debt on time and in full may help boost your score.
Diversify your credit mix
Having a mix of loans and credit can signify your ability to manage different types of debt responsibly. However, it’s worth noting that you shouldn’t take out a loan you don’t need just to boost your score.
Reduce your credit utilization
There are two ways you can reduce your credit utilization. You can apply for more credit or request a credit limit increase to give you access to more overall available credit. Alternatively, you can decrease your current balance by paying off some of your debt. Either path can help your credit score by lowering your credit use compared to your available credit.
Be mindful of multiple applications for financial products
An effective way to manage your use of financial products is to only apply for the credit you need. If you’re shopping around for a financial product, like a personal loan, you may want to get quotes from multiple lenders. Many lenders offer prequalification, which only involves a soft pull and won’t affect your credit score. But if you go through with the application, you’ll want to ensure your applications are no more than two weeks apart. Potential lenders will issue a hard inquiry to check your credit, which can negatively impact your score, and inquiries within a two-week window for the same financial product may be counted as a single credit inquiry and, therefore, be less damaging to your score.
Monitor activity through credit bureaus
You may have credit reports at each of the three major credit reporting bureaus: Experian, Equifax, and TransUnion. To ensure the most accurate information on your credit report, you can review each report once per year. Look for errors like credit accounts you didn’t open or payments marked as late even though you paid on time. If you find an issue, open a dispute with the creditor and the credit reporting bureau, as resolving an error could help quickly boost your credit score.
How can staying within a good credit score range benefit you?
When you have a good credit score, financial opportunities tend to be more abundant, especially when it comes to accessing different types of financial products. When you have a good score, you might notice lenders offering:
Preferred interest rates and repayment terms
Lenders typically offer better interest rates to the most highly qualified borrowers, so the better your credit score, the better rate you may receive. Depending on the size of your loan, your credit score could end up saving you lots of money with a lower interest rate. You may also be eligible for better repayment terms or a period of time at zero interest.
Unsecured credit cards or personal loans
It’s generally easier to qualify for a secured loan since the lender has collateral, like your car or home, which they can sell if you fail to repay the debt. However, a great credit score may qualify you for low-rate unsecured credit cards or personal loans without collateral requirements.
New credit opportunities
When you have a good credit score, you may receive offers for new credit cards, loans, balance transfers, and more. Lenders are more likely to want to give you access to new credit opportunities because they believe you’ll be a borrower who repays their debt responsibly.
Oportun: Affordable lending options designed with you in mind
Now that you understand what a good credit score is, you can learn about how Oportun may be able to help you if you’re looking for affordable credit options. Visit our homepage to learn about:
- Personal loans
- Secured personal loans
- Savings
- And more!
Sources
myFICO. What is a FICO® Score?
Ready to build a better future? Apply now.
Personal loans
