When is a Credit Score Considered Good

The place to begin when considering what comprises a good credit score is a credit report. While a credit report does not contain have a credit score, it does have all of the information (except income) that’s needed to develop your credit score. (Note: You are entitled to one free credit report each year.

So, what is a credit score when is one considered good?

Credit Score

You credit score is often referred to as your FICO score.  Named after the company, Fair Isaac Corporation, who developed this credit scoring system, your credit score represents to potential lenders the likelihood that you will pay back a loan.

Your credit score consists of calculations summing up the five major elements below:

    • Number of Credit Inquiries (10%)
    • Type of Credit (10%)
    • Length of Credit History (15%)
    • Debt Ratio (30%)
    • Payment History (35%)

The percentages indicate the importance of each factor contained in the one number score.

Credit Score Meaning

Your credit score is reported as a number between 300 and 850. In general, the higher, the better. A general guideline of what are considered good and poor credit scores is as follows:

720 to 850- Individuals with a score in this range represent the ultimate in creditworthiness. Typically, they will qualify for almost any type of loan. However, in today’s credit climate, to receive the most favorable loan terms, some lenders will require a score of more than 750.

640- 719- These people are thought of as a good, solid credit risk. They will be approved for most mortgage loans, auto loans and most credit cards. Interest rates for these individuals will be a little higher than for those in the top range.

550-639- Many lenders consider people in this bracket as sub-prime risks. They will see limited credit card and auto loan approval. The interest rates will be high if they can get a loan at all and they probably will not be able to obtain a home loan.

300- 549- These individuals will not qualify for most loans unless the note is co-signed or secured in some way.

Even if your credit score is below 640, and even though it may take a few years, there are techniques to improve it over time.