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What Is a Great Credit Score? | Scoring Models and Ranges Explained!

Congratulations, you've been invited to apply for a loan. But before you go ahead and fill the form given, there are a few things to consider.

Your credit score is one of the deciding factors on how much money you can borrow, your interest rate and so much more. This guide will answer the question 'What is a good credit score?'

Key Takeaways

  • A great credit score is considered to be a score that is above 670, although the exact definition of a good credit score can vary depending on the credit scoring model used to calculate it.
  • The score is calculated based on a person's credit history and is used by lenders, landlords, and others to determine the risk of lending money or extending credit.
  • Good credit means you have a history of managing your money responsibly. You’ve never missed a payment, and you pay your bills on time.
  • Ways to get a good credit score is by paying your bills on time and keeping your balances low. It's important to note that this will not happen overnight. It takes time, effort and patience to build up your credit score over time.

What Is a Great Credit Score?

A credit score is a numerical representation of your overall financial health. It measures how well you've been managing your debts and other obligations. A good credit score is a 670 or above.

If you have higher credit scores, you are sure to get approved for loans and credit cards with ease.

Great credit score shown on a clock

How A Good Credit Score Can Help You?

If you build a good credit score it can help you get an auto loan, rent an apartment, get utilities turned on, or even find a job. On the other hand, if you have poor credit score, it could cost you money or ruin your chances of getting a credit, a loan, or other type of financing.

Credit scores range from 300 to 850 and this is the scale used by most lenders and landlords. Here's what each number means:

  • 740 to 799: Excellent Credit Score
  • 670 to 739: Good Credit Score
  • 580 to 669: Average Credit Score
  • Below 580: Poor Credit score
Credit score rating concept

What Is a Bad Credit Score?

A bad credit score is anything below 580. This means that you have a high risk of not paying back your debts. If you have poor credit then you will have a hard time getting approved for loan or credit card, and other types of financial products.

If you have a low FICO score, you might want to consider getting a copy of your report from each of the three major credit reporting agencies (Equifax, Experian and TransUnion) so that you can dispute errors that could affect your score.

Credit Scoring Models

There are different types of credit scoring models. The most common type of credit score is the FICO score, which is used by 90% of lenders in the U.S.

Fico Scores

The FICO score is the most widely used credit score in the United States and is generally considered to be the most important factor in determining a consumer's credit worthiness. Developed by Fair Isaac Corporation (FICO), the FICO score has been in use since 1989.

Credit score parameter

Vantagescore Credit Scores

This scoring model was developed in 2006 by the three major credit bureaus; Equifax, Experian and TransUnion as an alternative to FICO scores.

Like FICO scores, Vantage Scores consider how much you owe, how long you've had credit accounts, whether you pay on time or not and how recently you've applied for new credit.

What Affects a Credit Score?

The best way to understand what a good credit score is or what affects your credit report, is to know what makes up your FICO score. Your FICO score is based on several factors:

Payment history (35%)

Payment history accounts for 35% of your credit score and is an indicator of how likely you are to repay debts in a timely manner. Your history of payment can include payments made on time or late, as well as any accounts that have gone into collections or been delinquent.

Amounts owed (30%)

The second most important factor is the amount you owe in comparison to how much credit you have available. This is a close second at 30%.

If you have a lot of debt compared to your available credit limit, it can indicate that you might be having trouble making payments and are at risk for defaulting on other obligations or bankruptcy.

Stack of dollar bills

Length of credit history (15%)

The length of time that you have been using credit contributes 15% of your total score; longer histories generally result in higher scores.

 If someone has little or no credit history (or bad payment history), it can be difficult for them to get approved for new accounts and may even cause their existing accounts to be closed down by lenders who don't want to take the risk associated with lending money to someone who doesn't have a track record of paying back what they borrow.

New credit (10%)

How many new accounts you have opened recently; opening too many new accounts can hurt your score because it may appear that you are overextending yourself financially.

Pile of credit cards

How Do I Get a Good Credit Score?

Pay your Bills on Time

To get excellent credit scores, there are several things that you can do. The first step is to ensure that all of your credit accounts are in good standing.

This means that you should make sure to pay all of your bills on time, and that you have no outstanding collections or delinquent accounts. It is also important to keep your balances low and to avoid applying for new credit unnecessarily.

Have A Variety of Different Types of Credit Accounts

Another important factor that can help you get a good credit score is to have a variety of different types of credit accounts. This means that you should have a mix of credit card accounts, loans, and other types of credit.

This shows that you are able to handle different types of credit responsibly and can help to boost your score.

Credit account paper with a credit card

Check Your Credit Report for Errors

It is also important to check your credit report regularly and dispute any errors that you find. Your credit report is a record of your credit history and it is used to calculate your credit score.

If there are errors on your report, they can negatively impact your score. By checking your credit report regularly, you can see any errors early and dispute them before they cause too much damage.

Be Mindful of How Often You Apply for Credit

Another key aspect of getting a good credit score is to be mindful of how often you apply for credit. Every time you apply for credit, an inquiry is made on your credit report which can negatively impact your score. It is important to only apply for credit when necessary and to avoid applying for credit too often.

Close up of Credit Application Form

Maintain A Low Credit Utilization Rate

To maintain a good credit score, it's important to keep an eye on your credit utilization. This refers to the percentage of credit that you are using at any given time. The lower your credit utilization, the better it is for your credit score. It is recommended to maintain a credit utilization rate below 30%.

Wrapping UP

In summary, a good credit score is a numerical rating that represents an individual's creditworthiness and is used by lenders, credit card issuers, landlords, and others to determine the risk of lending money or extending credit.

To get a good credit score, it is important to ensure that all of your credit accounts are in good standing, have a variety of different types of credit accounts, check your credit report regularly and dispute any errors, be mindful of how often you apply for credit and maintain a low credit utilization rate.

It is also important to maintain this good credit score by being consistent in paying your bills on time and keeping credit card balances low.

About Dusan Stanar

I'm the founder of VSS Monitoring. I have been both writing and working in technology in a number of roles for dozens of years and wanted to bring my experience online to make it publicly available. Visit https://www.vssmonitoring.com/about-us/ to read more about myself and the rest of the team.

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