Your credit score affects your financial life in more ways than one. When you apply for a loan or credit card, lenders base approval decisions in part on your credit health. Not only that, but your credit score can also influence the interest rates you’ll pay for credit cards, car loans, mortgages and other lines of credit.
FICO® and VantageScore® are the two most common credit scores for consumers. Both range from 300 to 850, with a higher score indicating lower credit risk. Knowing where you fall on the spectrum is important, especially if your goal is to get the best rate possible on your credit accounts.
The difference between a fair credit rating and a good credit score may be just a few points but it can make a world of financial difference when it comes time to borrow. Here’s everything you need to know about the good, the bad and the excellent when it comes to credit scores.
Credit score ranges: Is 700 a good credit score?
FICO® and VantageScore® calculate credit scores, but it’s the lender who decides whether a credit score is excellent, good, fair, poor or bad. What constitutes a good or excellent score ultimately depends on where the lender sets its cutoffs.
Broadly speaking, credit score ranges can be broken down along these lines:
|750 to 850
|700 to 749
|650 to 699
|550 to 649
|549 & Below
Most lenders consider a credit score between 700 and 749 to be good, but the lower cutoff can be anywhere from 680 to 720. If the cutoff is 700, a drop of just one point can push you into more expensive financing. That’s why it’s imperative to know your credit standing and whether you’re near the border to the next category, lower or higher.
Remember that credit scores are fluid, not fixed. The information on your credit report is what shapes your credit score calculations, and that information changes every time new data is reported (every payment, every monthly balance, every account). You have credit reports at each of the three main credit bureaus: Equifax, Experian and TransUnion. The credit score calculated for each report can be different, because not every creditor reports to all three.
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Each bureau calculates your credit score. Your score from each bureau is likely can change from month to month, based on factors like your payment history, the amount of available credit you have and use, whether you’ve recently applied for or opened any new credit accounts, the types of credit you use and the overall age of your credit history.
FICO® and VantageScore® provide the algorithms that the bureaus use to calculate your score. Neither company shares the details of those algorithms, but both companies use more or less the same factors to calculate your score. Payment history, including delinquencies and collections, and credit utilization (or the amount of debt you have in relation to the amount of credit available to you) carry the most weight.
You don’t have just one FICO® score or VantageScore®. Each scoring model has several variations, generally industry-specific. For example, your auto loan credit score is a little different from your credit card credit score. Lenders use different scores for different credit decisions and the lines between the score ranges may be drawn differently.