What Is a Good Credit Score?

Sheryl Nance-NashUpdated May 18, 2021

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When it comes to your financial life, few things are as important as your credit score. Those three digits affect your interest rate on loans and car insurance premiums, and may determine whether you get a new job or apartment. That is just the beginning of the list. But what is considered a good credit score, why is a credit score important, and what’s a good credit score for your age?

First, a Credit Score Refresher

A credit score is a three-digit number based on the information in your credit reports. It helps predict how likely you are to repay a loan and make the payments when they’re due. There are several scoring models, but the two most commonly used are FICO® and VantageScore®. Both predict a consumer’s ability to repay a debt, but they can produce slight scoring differences.How is this all-important number calculated? Key factors that come into play are how much money you owe, whether you pay your bills on time or not, how long you’ve had credit, and whether you’ve asked for new credit recently. Your mix of credit matters as well. If you have installment loans like a car loan or mortgage, and revolving accounts like credit cards and other lines of credit, and are handling them well, creditors will look favorably on this.A statistical program compares this information to the credit behavior of folks with similar profiles. Given this look-see, the program assigns you a score that typically ranges from 300 to 850.The higher the number, the better you’ll be judged by creditors because they’re predicting risk—the risk of default. Someone with a low score has a greater chance of denial for a loan or credit card, and if approved, a higher interest rate and less favorable terms.

The Story a Credit Report Tells

You want to be clear about what goes into your credit reports as they are critical in determining your credit score. Think of your credit reports as a summary of your credit life. The three major credit bureaus, TransUnion, Equifax, and Experian, collect credit and other information about you. They have your name, address, Social Security number, details about your credit cards and loans, and whether you’ve filed for bankruptcy, for example.Getting the goods on you pays off for the credit bureaus because businesses pay them to use that information to check your credit.Do take solace in the fact that the credit bureaus can’t be willy-nilly with your information. The Fair Credit Reporting Act, a federal law, requires that the information they collect about you is accurate.

Finding Your Credit Score

Credit reports don’t show your credit score, so how can you know and track your score?You can buy credit scores from the three credit bureaus or from FICO.Sometimes you can find your score on a credit card or loan statement.You can use a credit monitoring service or free credit scoring site.

The Good, the Bad, and the Ugly

So how do the numbers of a credit score break down? FICO scores are categorized like this:

800 to 850: exceptional
740 to 799: very good
670 to 739: good
580 to 669: fair
300 to 579: very poor

VantageScore ranges are a bit different, but good credit is defined as 661 to 780.Most Americans have a credit score that falls into the “good” range. The truth is, though, that some creditors have their own definitions for good and bad scores.Even if you have bad credit, you may still be able to get a startup business loan with no collateral.And if you own a business, you’ll need to pay attention to your business credit score as well as your personal score.

What Is a Good Credit Score for My Age?

Misery loves company or you may have bragging rights, whichever it turns out to be. Here’s the average credit score by age in 2020, according to Experian.

Millennials (24-39): 680
Gen Xers (40-55): 699
Baby boomers (56-74): 736
The Silent Generation (75+): 758

You see the averages. Where do you fall?

How Can I Raise My Credit Score?

You may need to cut yourself some slack. Lower credit scores aren’t always tied to missteps like late payments. Having little to no credit history can also result in a low score. If your credit history is so new that the credit bureaus don’t have much information on you, they can think of you as risky because you have no track record. Presumed innocence doesn’t count with credit bureaus.But now that you know how you stack up, you might be feeling competitive or be otherwise motivated to boost your score. The good news is, there are steps you can take to improve your credit score, and you won’t have to wait for what seems like a lifetime to start to see the numbers change in your favor.

Scour Your Credit Reports

One of the first things you can do is check your credit reports for any errors. Report any mistakes to the credit bureaus by mail or online, and contact the company that provided the information to the credit bureau, the Consumer Financial Protection Bureau advises. You can get a free copy of your credit report from each credit bureau by going to annualcreditreport.com.

Pay Bills on Time

Even one late payment can ding a credit score, and working hard to make past due accounts current is in your best interests.

Pay Attention to Debt

Reducing your credit card balances can reduce your credit utilization ratio, which is how much of your available revolving credit that you’re using, expressed as a percentage.A good rule of thumb is to keep your balances below 30% of your available credit.But keep using your credit cards, even a little, and paying the balances in full each month, the Consumer Financial Protection Bureau advises, to prove that you can responsibly use your cards. And that will help build your credit score.

Piggyback

If a family member has excellent credit, ask if they will add you as an authorized user on an existing credit card (it’s best if it’s an older account and has a high credit limit and a trouble-free history).The point of piggybacking off the primary cardholder’s good credit habits is to increase the authorized user’s credit score, of course, but not all card issuers report authorized users’ activity to the credit bureaus.

What Can I Do With an 800 Credit Score?

If you’re in the 800-plus credit score club, congrats. Only 21% of consumers are in the FICO exceptional range of 800 to 850, according to Experian. You likely worked hard to get in and stay in that club. You’ll be rewarded. You are the creme de la creme. Expect to get the best interest rate offers for mortgages or credit cards with premium reward programs. No doubt it will also be easier for you to get the nod for lines of credit and personal and car loans. Oh, yeah, and higher credit limits, too, which steps up your purchasing power and helps you maintain a low credit utilization ratio.

The Takeaway

Your credit score is one of the foundations of your financial life. A good credit score opens the door to opportunities, and a poor score can impede your progress. If you’re in the market for a new credit card, compare card offers on Lantern. You can toggle the credit rating bar to find the best fit for you.

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About the Author

Sheryl Nance-Nash

Sheryl Nance-Nash is a freelance writer specializing in personal finance, business, and travel. Her work has appeared in Money Magazine, Newsday, The New York Times, Business Insider, BBC.com, AARP the Magazine, ABCNews.com, Forbes.com, among others.

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