Key takeaways

  • Your FICO or VantageScore credit score represents your creditworthiness, and the higher your score, the better you'll look to lenders
  • There are a variety of factors that go into your credit score, including on-time payments, the amount of your available credit you use and the length of your credit history
  • You can learn what your credit score is and adopt good credit habits to boost it

A good credit score is something many people strive for throughout their lives. Good credit opens the door to better interest rates, more credit card options and a higher chance of loan approvals. Your credit score captures your creditworthiness and helps lenders assess risk. A high credit score tells a lender that a borrower is more likely to repay a debt. If you tend to have a low credit score, lenders will see you as a risk.

What is a good credit score?

While there are a variety of credit scoring systems out there, and your score can vary among them, the main players are FICO and VantageScore. VantageScore and FICO scores range from 300 to 850 (older VantageScore models used a different range). The higher your credit score, the better it is. Let’s take a look at all that goes into a good credit score and what it takes to get there.

FICO defines a good credit score as one that falls between 670 and 739, whereas anything above 800 is considered excellent. FICO credit scores between 580 and 669 are considered fair, and those between 740 and 799 are very good. A poor FICO credit score is anything below 579.

VantageScore 4.0 (the newest VantageScore credit scoring model) ranges from 300 to 850, much like FICO. This method of scoring defines 661 to 780 as a good credit score and 781 to 850 as an excellent credit score. Scores that fall between the 601 and 660 range are considered fair and 500 to 600 are considered poor. Any score that falls below 499 is ruled a very poor credit score.

What factors affect your credit score?

Your credit score is calculated based on a variety of factors. There are different versions of credit scores and different ranges, so while the ranges presented here are based on the standards of the credit reporting agencies, credit issuers may have more specific score requirements within a range to meet their approval standards.

Your FICO score is determined by a combination of five credit factors. These factors include amounts owed, credit mix, new credit, length of credit history and payment history. FICO assigns a percentage to each of these factors to determine how much weight they carry in your credit score calculation.

Payment history

Payment history captures your history of making your payments on time and accounts for 35 percent of your credit score.

Amounts owed

The outstanding balances on your credit accounts make up another 30 percent of your FICO score. Lenders want to know if you are using a high amount of your available credit, which could mean you are at higher risk for default.

Length of credit history

The longer you’ve had your credit accounts, the more positive it is for your FICO score. This factor takes into account the age of your oldest account and newest account, as well as the average age of all your credit accounts. It makes up 15 percent of your credit score.

New credit

Lenders view opening numerous credit accounts in a brief period of time as a credit risk. This factor makes up 10 percent of your FICO score.

Credit mix

Lenders would like to know that you handle different sorts of credit well. That’s why this input makes up 10 percent of your score and factors in accounts such as instalment loans (such as mortgages and car loans) and revolving debt (such as credit card debt, store credit cards and home-equity lines of credit).

VantageScore calculates your credit score using similar factors as FICO, though VantageScore weighs factors differently. Payment history is still the most influential factor for VantageScore, making up 41 percent of your score.

However, your credit mix and credit history together account for 20 percent of it, while your credit utilization counts for another 20 percent. Other VantageScore inputs are new credit (11 percent), balances (6 percent) and available credit (2 percent). Also, VantageScore uses “trended data” rather than just data at a particular point of time.

Having good credit can provide a lot of benefits for your financial future, such as helping you qualify for lower interest rates. That’s why you should aim for a good credit score.

How to get a good credit score

Improving your credit score begins with knowing what your credit score is. You have the right to a free credit report once a year from each of the three credit bureaus (you can request a credit report at, although that doesn’t give you a credit score. You can find out your credit score from the credit bureaus, or FICO, for a fee. Some lenders also offer them for free to customers.

Here are a few steps you can take to get a good credit score:

  • Pay your bills on time. Payment history is the most important factor that makes up both your FICO and VantageScore, so you should aim to never pay bills late. You can improve your score by always paying your bills on time and in full each month. When you miss a payment, it can linger on your credit report for up to seven years.
  • Keep your card balances low. And credit utilization is another important factor in determining your credit score under any model. Experts suggest keeping your credit utilization at 30 percent or below. However, keep in mind consumers with excellent credit scores tend to have a credit utilization rate in the single digits.
  • Try to avoid closing old credit accounts. Keep your accounts open and let them grow with you. Old accounts help add length to your credit history, so keep old accounts alive and in good standing. Closing an account cuts the amount of available credit available to you, which drives up your utilization and ultimately dings your score.
  • Make sure your accounts are being reported to the credit bureaus. If you only have a few credit accounts, make sure those are being counted toward your overall credit score. For example, if you are an authorized user on someone else’s credit card, make sure you’re actually benefiting from being on the account. Alternatively, a history of on-time rent and utility payments can really boost your credit score without much hassle. You may need to use an alternative reporting service, such as Experian Boost, in order to add these accounts to your credit history.
  • Limit credit inquiries. When you apply for new lines of credit, a hard inquiry is applied to your credit report. While this only dings your credit score a tad, you don’t want to apply for a ton of new credit cards all at once. Do thorough research when you are on the market for a new credit card, and be sure to only apply for the one that will best suit your financial needs.

However, if you are looking for a mortgage or auto loan, inquiries made within a period of time that is a “shopping window” will be counted as only one credit inquiry and will not negatively impact your credit score.

The bottom line

Improving your credit score is all about building good credit habits and maintaining those habits over time. Keep in mind that it takes time to build a strong credit score. If you are recovering from a financial setback or simply looking to improve your credit score, paying your bills on time, maintaining a low credit utilization and limiting new credit inquiries will put you on the right track toward the credit score of your dreams.