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If you’re looking to buy a home or sign up for a new credit card, you’re going to need to check your credit score. And the better your score, the more likely you’ll be approved and get a competitive interest rate. But understanding what constitutes a “good” credit score can be challenging, as definitions may vary by lender and credit scoring model.
Ahead, we explain what is your credit score, the definition of a “good” credit score, and steps you can take to increase your score.
Your credit score is represented by a three-digit number range from 300 to 850. Just like in school, the higher the number reflects a better score. This number is used by companies, like banks or lenders, to determine how likely you’ll be to pay back a loan. For consumers, a credit score is a good tool to understand your financial health.
“A good credit score opens doors for more than just opening a line of credit or getting a loan,” says Jennifer White, senior director, banking and payments intelligence at J.D. Power, which offers consumer insights and advisory services. “A good credit score can also lead to offers for credit cards with zero interest [balance] transfers, which allow you to move existing debt to a card that will cost you less in the long run.”
As a consumer, it’s important to be aware that there’s no one single credit score—there are a lot of variations. But the two most prominent credit scoring systems are FICO and VantageScore.
According to MyFICO.com, a good FICO credit score is one that’s between 670 to 739. Scores higher than that—between 740 to 799—are considered “very good,” and 800 and above are “exceptional.”
A “fair” credit score falls between 580 to 669 and a “poor” credit score is anything below 580.
In 1989, the Fair Isaac Corporation launched the FICO credit score, which is now one of the leading credit scoring models. FICO scores offer lenders insight into your credit history.
There are multiple factors that contribute to your FICO credit score, but some have more weight than others. Here’s how FICO scores are calculated:
VantageScore is another leading credit score model used by many financial institutions and lenders.
VantageScore 3.0 and 4.0 follow the 300 to 850 range, but previous iterations had a range of 501 to 990. According to the VantageScore website, a good VantageScore is called “prime” and in the range of 661 to 780. Scores in the range of 781 to 850 are considered “superprime.”
VantageScore credit scores between 601 to 660 are “near prime” and those with a range of 300 to 600 are referred to as “subprime.”
The VantageScore 4.0 model is fairly similar to the FICO model and is calculated with the following weights and factors:
Additionally, VantageScore labels certain factors as degrees of “influential.” Here’s a breakdown of what those are:
VantageScore has some nuances when compared to FICO and uses different descriptions, but the ranges and impact on credit score are similar.
FICO and VantageScore both vary a bit in how they define a “good” or “prime” score, and to make things even more complicated, different financial institutions might have their own standards.
“A good credit score depends a lot on the financial institution that is lending the money,” says Chris Fred, head of U.S. credit cards and unsecured lending at TD Bank. “They all have their unique ways of evaluating creditworthiness and the credit health of customers based on a variety of factors, not just the score.”
Rather than stress about a very specific number, it’s best to just focus on keeping your accounts in good financial standing and working toward the highest score you can. If you want to improve your credit score, there are a number of actionable steps you can take to move the needle forward.
Here are 10 steps to get you started:
If your credit score has room for improvement, taking these steps can help. Start by obtaining your credit score from a trusted source.
“For many consumers, your score is offered for free online through not only the three large credit bureaus, but also often by your bank or your credit card company,” says White. "At some of those banks and credit card companies, your credit score will appear immediately when you login to their mobile app or online tools.”
Knowing where you’re at is the first step. Taking appropriate action and monitoring your credit score are the next steps. It may take some time, but consistency will work in your favor and can help your finances more than you realize.
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