The most commonly used scores run from 300 to 850. Climbing into a good range (690 and up) or excellent (720 and up) gives you better choices and saves money.
When you check your credit score, you'll probably want to find out how you compare. What is a good credit score?
Each lender sets its own standards for what constitutes a "good" score. But, in general, scores fall along the following lines:
|300 - 629||630 - 689||690 - 719||720 and up|
Fair Isaac Corp. produces the credit scoring algorithm used for the majority of lending decisions in the U.S. Data from April 2017 show the average FICO score in the U.S. was 700. Twenty percent of scores fell below 600, 23.2% were between 600 and 699, and 56.8% were 700 and above.
How does your credit score affect your life?
Even if your score is in the low 500s, you may still be able to get credit, but it will come with a very high interest rate or with specific conditions, such as depositing money to get a secured credit card. You may have to pay more for car insurance or put down deposits on utilities.
But as you add points to your score, you'll have access to more credit products - and pay less to use them.
At the other end of the scale, borrowers with scores above 750 have many options, including the ability to qualify for 0% financing on cars and 0% interest on credit cards.
Find the Starting Point
It's important to know where you stand, so it pays to monitor your score over time. You can get a free credit score from a number of personal finance websites, including AnnualCreditReport.com.
The important thing is to use the same source every time you check. Doing otherwise is like trying to monitor your weight on different scales - or possibly switching between pounds and kilograms. Some sources may be using a different scale entirely.
So, pick a source and stick with it to track improvement. Progress you make measured by one source will be reflected in the others.
And be aware that, like weight, scores fluctuate. A score is a snapshot, and the number can vary each time you check it. As long as you keep it in a healthy range, those variations won't have an impact on your financial well-being.
Lenders Look at More than Credit Scores
When you go to borrow money, a good credit score doesn't guarantee a good interest rate - or even approval.
Credit scores look at your reported credit history to gauge the likelihood that you'll repay borrowed money; you can be deep in debt and still have great credit scores if you've paid all your bills on time.
But your credit reports don't reflect whether you can afford to repay the credit you're applying for. That's why your income and other debts play a key factor in some lending decisions, as lenders consider what you owe alongside what you earn and assets you have accumulated.