As I explore below there is no exact definition as to what is a good credit score range. However, I can give you the credit score scale and a few guidelines to go by that should serve to answer your questions about what is a good credit score, a bad credit score and everything in between.
So what does the credit score range actually mean?
Scores at the high end of the credit score range will typically qualify for the lowest interest rate loans. Borrowers with excellent credit will usually get approved for credit cards and loans because they represent a low risk to the lender.
On the other hand, borrowers with poor credit may not get approved because their credit report shows signs of missed payments, defaults or high credit utilization.
FICO Credit Score Range
You may be familiar with the term FICO, but what does it stand for?
The Fair Isaac Corporation (FICO) developed a standard credit score range by analyzing millions of credit reports to identify common signs of high and low risk borrowers.
FICO claims that:
“90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.”
Most likely your loan officer or credit card company used this score to determine your creditworthiness.
The standard FICO credit score range is 300 to 850. Very few will find themselves with a score of 300 as well as almost no one will find themselves with a perfect credit score.
I can’t count how many times people have asked me why, even with their excellent credit history, they do not have a perfect credit score. While it may seem that these responsible consumers are being unfairly represented by their credit score, the real problem lies in the way credit scores are calculated. We will discuss the reasons why it is difficult, if not impossible, to earn a perfect credit score below.
FICO Credit Score Range:
- Excellent Credit: 750 to 850
- Good Credit: 700 to 749
- Fair Credit: 630 to 699
- Poor Credit: 550 to 629
- Bad Credit: 300 to 549
VantageScore Credit Score Scale
As if credit scores weren’t complicated enough, in 2006 the three major credit rating agencies (Experian, Equifax and TransUnion) developed their own generic credit scoring model.
This is called the VantageScore.
The goal of this new model was to help creditors better assess their risk of “thin file” consumers who have a limited credit history. With the standard FICO score it was difficult for lenders to gauge a borrowers risk based with only a limited amount of credit data available. This has led to many borrowers being denied credit due to their short credit history.
Under the VantageScore system the new credit score range is from 501 to 990. Since the new score range is higher than the standard FICO scores it is important to take note of which score you are looking at when deciding what is a good credit score.
For example, a credit score of 750 is considered to be excellent in the FICO system but is actually an average score in the new VantageScore rating system. Making this mistake before applying for a loan could leave you facing an unpleasant surprise when trying to get the best interest rates available.
VantageScore Credit Score Range:
- Excellent Credit: 900 to 990
- Good Credit: 800 to 899
- Fair Credit: 700 to 799
- Poor Credit: 600 to 699
- Bad Credit: 501 to 599
Excellent Credit Score Range
- FICO: 750 to 850
- VantageScore: 900 to 990
Fact: Only 14% of the US Population Has Excellent Credit.
A credit score above 750 is considered to represent a consumer with an excellent credit history and a low risk to lenders.
If you find yourself with a very high credit score, this wasn’t by accident. It means that you have actively managed your credit throughout your established credit history. Anyone with excellent credit most likely has high credit limits and low utilization. Of course, they also have an immaculate repayment history as well as a variety of accounts, including credit cards, mortgage, student loans, etc.
Lenders will always be enthusiastic to work with borrowers with excellent credit because they represent a low risk venture. Although bad credit borrowers may believe they are just as likely to repay their loan as someone with excellent credit, history says otherwise. Banks and creditors can use a borrowers credit history to accurately predict their chance of default.
How to improve your credit score: Continue to use your credit cards each month. While it may be tempting to cut up your credit cards once they’re paid off, if they remain inactive for an extended period of time your credit card company may stop reporting to the major credit bureaus. Even if you make only a small purchase each month and pay it off, this will continue to improve your credit score over time.
Good Credit Score Range
- FICO: 700 to 749
- VantageScore: 800 to 899
Fact: Currently 25% of the US Population Has Good Credit
Our journey has finally led us to the answer to our original question: what is a good credit score? Depending on what score you’re using a good credit score may range from 700 to 749 with FICO and 800 to 899 with VantageScore.
Consumers with good credit scores will qualify for loans at attractive interest rates but they may not get the best available rates. If you have a good credit score you have clearly made smart decisions about your credit management, but you may still be looking for other ways to improve.
What’s the best way for someone to get their credit score into the excellent range? Use less than 30 percent of your available credit, make your payments every month and always ask to increase the credit limit on your credit cards every 6 months.
How to improve your credit score: Lower your credit utilization, pay off outstanding debt and open diverse types of credit lines.
Fair Credit Score Range
- FICO: 630 to 699
- VantageScore: 700 to 799
21% of the US Population has Fair Credit
Consumers with fair credit end up in this range for a number of reasons. Since a large factor of calculating credit scores is based on payment history, anyone that ends up in this range is likely to have a short credit history or have missed payments in the past. One of the downfalls of being in this range is that it can take time to build up a credit history and improve your credit score.
Another large determining factor of credit scores is the amount owed on credit cards and loans. Borrowers with fair credit need to focused on paying down their existing debt. Many financial experts believe that credit utilization below 30 percent is a sign of excellent credit management. Consumers with outstanding balances should aim to lower their credit card balances below 30 percent of their credit limit and pay off their balances each month.
Borrowers with fair credit may qualify for new lines of credit or loans, but not at the best interest rates.
How to improve your credit score: Aggressively pay off outstanding balances and make payments on-time each month.
Poor Credit Score Range
- FICO: 550 to 629
- VantageScore: 600 to 699
20% of the US population has Poor Credit
Consumers with poor credit are considered to be a higher risk to lenders. Due to their credit history, these borrowers will have a difficult time getting credit. If they do qualify for a loan it may be at a very high interest rate.
Anyone with a credit score in this range should realize that their financial opportunities are not doomed. However, it will take time and smart credit management to improve their credit score.
How to improve your credit score: Check your credit report for errors. Continue to pay off debt and make payments every month.
Bad Credit Score Range
- FICO: 300 to 549
- VantageScore: 501 to 599
Fact: 19% of the US Population Has Bad Credit
Bad credit borrowers may not qualify for credit cards or personal loans. They represent a high risk to lenders because consumers with bad credit tend to have a poor history of repayment and possibly bankruptcy.
While getting a loan may be extremely difficult for bad credit borrowers, it is not completely out of the question. In fact, there are many companies that specialize in working with bad credit borrowers.
In exchange for taking on the risk of a bad credit loan, lenders typically charge extremely high interest rates.
How to improve your credit score: Consider opening a prepaid credit card account to build credit history without the high interest rates or risks of credit cards. Pay off existing debt and check your credit report for errors.
A Good Credit Score and Your Financial Health
Knowing what to aim for when improving your credit score is the first step in active credit management.
After all, you may already have a good credit score without even knowing it. While there is a passionate group of people that actively monitor their credit scores, there’s a large group that does not. In fact, according to VantageScore, 60 percent of the U.S. population does not have good credit.
If you are looking for ways to improve your credit score I encourage you to sign up for our enewsletter to receive our exclusive tips and advice from credit experts.
Do you have a good credit score? What have you done to improve your credit score? How many points has your credit score improved over the last 6 months? Share your experience with our community!