5/18/2023
Having a good credit score can help you get approved for various financial products and get better terms. However, saying what is a good score is not so simple because it depends on who reviews your information and the particular application you make.
When you want to get approved for a loan or other product, you are told that the lender has a cutoff between acceptable and poor. This happens because many companies do not disclose their thresholds to the public.
Using the FICO system and VantageScore, a score between 670 and 750 is usually considered good enough.
What is a good VantageScore?
The VantageScore is a competitor to the FICO score and is less popular than the FICO score. Although the calculation may vary by source and the percentages assigned to the categories, the scale is the same: 300 to 850 points.
A good VantageScore is between 661 and 780, which this company calls a prime credit level. When you are above 780, you enter super-prime territory.
What is a good FICO score?
The criteria with this company is not very different from the previous one and a good FICO score would be between 670 and 739. The people doing this calculation also indicate that those in the 740-799 range have very good credit and over 800 is exceptional.
For reference, the Fair Isaac Corp. (FICO) was the first company to develop this scoring system to evaluate the creditworthiness of Americans. To do so, it uses the information provided by the 3 major bureaus: Equifax, Experian and TransUnion.
Why is a good credit score important?
Although the credit score is one of several factors that affect your chances of getting financing, it is one of the most important. This is because lenders are constantly evaluating the risk involved in giving money, and the score says a lot about how well you are managing your finances.
When you have good credit in the range we have mentioned, you are more likely to be approved and receive better terms than if you did not. In addition, this advantage not only applies to financing; it helps you get a better lease or lower premiums when you take out car insurance.
With the above in mind, there are several benefits related to a good credit score:
- You get more bargaining power.
- You get access to higher limits and amounts when borrowing.
- You get lower interest rates on loans and credit cards.
- You get better options and lower premiums for insurance
- Avoid making security deposits for utilities or cell phone contracts
- You are more likely to get approved for financing and other products.
A good credit score can be relative
If we review the statistics, we see that the average VantageScore is 688 and the median for FICO stands at 711. While any figure above 680 is good, a score above 740 is already in the realm of excellent credit. However, the line between what is considered a good score or not is sometimes not so clear.
Understanding when a credit score is good or not can be complicated because experts do not agree on this issue. Depending on the institution or lender, your score could be good enough or fall short. As a general rule of thumb, you should keep it at a level of 660 or higher.
If you want to get a better idea of where you stand in relation to others, here is a comparison chart of the US population:
| Average score in USA | % of the population |
| Up to 499 | 5.8% |
| 500‐549 | 8.4% |
| 550‐599 | 9.8% |
| 600‐649 | 10.2% |
| 650‐699 | 12.7% |
| 700‐749 | 16.3% |
| 750‐799 | 18.4% |
| 800‐850 | 18.6% |
When we analyze this information, we see that just over 53% of Americans have a credit score above 700. That also means that approximately 46% fall below that line.
What affects your credit score?
If you've read some articles on Busconomico where we've talked about credit scoring in the United States, you'll know that the scoring models differ in their calculation because they assign different values to the evaluation categories they both use:
- Available credit
- Payment history
- Number of accounts
- Credit inquiries
- Use of credit limits
- Balances related to your active credit
Ultimately, the best thing you can do for your personal finances is to pay on time, use your credit responsibly and measure your hard inquiries. Knowing what affects your score will give you the tools to have the quality of life you aspire to.
Español: ¿Qué score de crédito es bueno para préstamos y seguros?