Having a good credit score is something that many people strive for throughout their lives. Good credit opens the door for better interest rates, more credit card options and a higher chance of loan approvals.
While there are a variety of credit scoring systems out there and your score can vary between each, the main players are FICO and VantageScore. VantageScore 3.0 and FICO scores range from 300-850 (older VantageScore models used a different range). The higher your credit score, the better it is. A good score on FICO’s scale is between 670 and 739, while a good score for the VantageScore scale is 661-780.
Here’s a full breakdown of score ranges:
- 800 to 850: Exceptional
- 740 to 799: Very good
- 670 to 739: Good
- 580 to 669: Fair
- 300 to 579: Poor
- 781 to 850: Excellent
- 661 to 780: Good
- 601 to 660: Fair
- 500 to 600: Poor
- 300 to 499: Very poor
Credit score differences by type
The way your credit score is calculated hinges on a variety of factors. There are different types 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.
Credit score range differences
FICO and VantageScore manage the same credit score range. However, they don’t have the same distinctions between the values. VantageScore makes it a little easier to get to the excellent range, at 781. FICO, however, starts it’s excellent range at 800.
VantageScore also makes a distinction between poor and very poor, making their poor range 300-600, while FICO caps the poor range after passing 579. While it may be more difficult to get an excellent score on FICO’s range, it’s also a bit more difficult to get a poor rating.
Different credit score calculations
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: 35 percent
- Amounts owed: 30 percent
- Length of credit history: 15 percent
- New credit: 10 percent
- Credit mix: 10 percent
FICO has also recently introduced modifications to its score calculations. The modifications are a part of the FICO Score 10 Suite. The suite includes two new scoring models, FICO 10 and FICO 10T.
FICO 10 is most similar to the current FICO 9 model, while FICO 10T includes trended data, or how you manage your credit accounts over time. It’s meant to give lenders insight into how you manage payments and whether you reduce or increase your debt over time.
VantageScore calculates your credit score using similar factors as FICO, though VantageScore weights factors differently. Payment history is still the most influential factor for VantageScore. However, your credit mix and credit history carry more weight in the VantageScore rankings. Instead of exact percentages, VantageScore offers a hierarchy of its scoring factors:
- Payment history: Extremely influential
- Credit mix and age: Highly influential
- Amount of credit used: Highly influential
- Balances and debt: Moderately influential
- New accounts and inquiries: Less influential
- Available credit: Less influential
Importance of good credit
Having good credit can provide a lot of benefits for your financial future.
For starters, good credit can help you access more credit card options. And when your score moves into the excellent range, even more card possibilities are available. In fact, the majority of rewards cards are looking for applicants with good to exceptional credit.
For example, the Citi Rewards+℠ Card, one of Bankrate’s picks for the best rewards cards of 2020, is most attainable for applicants with a score between 670 and 850. Other great cards in this range include the Capital One® Quicksilver® Cash Rewards Credit Card and the Discover it® Cash Back Card. Each of these cards offers great cash back rewards to add value to your credit card purchases, all for no annual fee.
Another perk of having good credit is access to lower interest rates. Most credit cards have variable interest rates, which may range anywhere from 13 percent to 26 percent. You won’t find out your assigned interest rate until you are approved, but your credit score is one of the factors used to determine how high it will be. Your credit score is also used to determine interest rates for loans.
How to improve your credit score
Improving your credit score begins with knowing what your credit score is. Start by requesting a credit report. You have the right to a free credit report once a year from each of the three credit bureaus, and you can find out your credit score on your credit report or from a reputable credit reporting site.
You can also improve your score by paying your bills on time and in full each month and keeping your card balances low. Payment history and credit utilization are some of the most important factors in determining your credit score under any model. And lastly, try to keep your accounts and let them grow with you.
Improving your credit score is all about building good credit habits and maintaining those habits over time.