Everyday, thousands of Americans are searching to find out what is a good credit score and not surprisingly, the answers they find are all different. Some regard anything over 650 to be a quality score while others contend that 725 is where a good credit score begins. Truth be told, there is no authority that defines a credit score as ‘good’ and depending on the creditor, you may or may not be approved for the credit you’re looking for.
A good credit score is anything 700 or above. Generally, that number will get you approved for most of the credit you need. You may not see the best interest rate possible, but you’re still able to obtain the most loans at a competitive rate. To break down the ‘good credit score’ table even further, this is how I would classify the range of all credit scores.
Rating Credit Score Range
Excellent 750 - 850
Good 700 - 749
Fair 625 - 699
Poor 550 - 624
Bad 300 - 549
Having a good credit score is more than just an ego boost, it’s also an extreme money saving technique. Unless you have the resources to make large purchases with cash, obtaining credit for things like your first home or automobile can be a stressful process. The importance of maintaining an excellent credit score so that when the times comes to use it, you have it, is immense. The difference in interest rate may not jump out at you but the difference in total cost between FICO credit scores is astounding. Looking at current mortgage rates, let’s see how the varying FICO credit scores stack up when applying for a 30-year fixed mortgage of $300,000.
FICO Credit Score Mortgage APR Monthly Payment
760 - 850 4.280% $1,481
700 - 759 4.502% $1,520
680 - 699 4.679% $1,552
660 - 679 4.893% $1,591
640 - 659 5.323% $1,670
620 - 639 5.869% $1,773
You can see right away that the difference in monthly payments from the best and worst credit score is $292 and when you make a total of 360 payments towards a mortgage, that money adds up real fast. $105,000 is the difference between an excellent credit score and a fair one when applying for a $300,000 home loan. And that’s just in a home loan!
When you factor in the money you can save with credit card payments, auto loans and other types of credit, there are literally hundreds of thousands of reasons to keep an excellent credit score. Of course, maintaining an excellent credit score is easier said than done. Graduating from college with a heap of personal loan debt, I was forced to put aside my aspirations of a home until I could control my debt. My current 500 credit score has made it all but impossible to be approved for a home loan, credit card or anything else really but I have taken steps in the last 12 months that have actually brought my credit score up from 450!
- Paying Everyone on Time – Sadly, I had to pick and choose the creditors I could afford to pay on time. After implementing a tight budget and finding a new job that paid me just a small amount more, I am finally able to pay all of my bills on time. Right now, that means not saving any money for the future or having spending money but as things gradually improve, I’ll think about setting some money aside.
- Stop Applying For Credit – For some strange reason, I would go on credit binges, looking for ways to take out a quick credit card or loan simply to pay my other bills. Finally, I realized that taking out a loan simply to pay another (with a lower interest rate to boot) was flat out stupid. Not only did I increase my debtor amounts but I hurt my credit score with so many inquiries, many of which I was declined for. In the last 12 months, I have only applied for credit once and wouldn’t you know it, I was still declined.
- Negotiated With Collectors – Last but not least, I made the effort to reach out to by debtors that had filled for collection against me. Many would simply avoid these people but I decided to take charge and finish these phone calls once and for all. Many don’t realize this but consumers have the edge when dealing with collection agencies. If you’re a good negotiator, you can pay 50% of your debt (or sometimes even less) and have the entire debt removed. This won’t help your credit score in the immediate future but in seven years, the infraction will disappear.
If you currently don’t know what your FICO credit score is, you need to find out ASAP and start working toward a better one. Credit scores make all the difference in first getting approved for credit, second, determining how much credit you are eligible to receive and finally just how much you’ll have to pay back.
- To receive your free credit score today from all three major credit bureaus, sign up for GoFreeCredit.com and their 7-day free trial offer.
{ 10 comments… read them below or add one }
Great article. Your credit score can also effect insurance rates.
i really do agree to the upmost. Your insurance is a big deal and it could mean the difference paying as much as 100.00 or more according to your credit score. But also, loans on cars, houses and even personal.
This is a great article about how really important our credit score is important but knowing is ONLY half the battle. What about being proactive and taking responsibility before it is too late to protect yourself before any damage is done?
Great article–I am still young and have been blessed to not need to take on any debt so far, but what I do and always tell my friends to do in order to keep their credit score up is apply for credit cards and hold them in your drawer even if you don’t spend anything on them. As far as I know, credit availability and utilization are one of the factors that go into determining it, so having an aggregate $20K credit limit while spending 1K a month is much better than a 1K limit but spending 900 a month.
That may work to get your credit started but to build good credit you need to keep it active. Try only using the credit cards for small purchases(under 50 dollars), or for one purpose; such as buying gas. Also only use it when you have the funds AVAILABLE IMMEDIATELY to back it up. When banks pull your credit score, they also see your full credit report and details on how you use your credit. Think about it, if I’m giving Henry a loan and on his credit report it says he has a 8000 dollar credit limit that he’s had for a year and he’s never used or made a payment on; that doesn’t tell me how good he is at borrowing and repaying it really doesn’t say anything to me. Keep that in mind
nice article…..i am a 24 years old and my credit rating score is poor…….could you give some advice to increase my credit rating?
Hey Michael,
A good credit score is something that you can prioritize having if you want to see a good boost in the right direction in your financial life. Most creditors are willing to negotiate if you have the right credit.
If you have a mid 700s and above credit score, you will get the very best rates available. A good credit score can give you enough leverage that a bad credit score does not. With such a good credit score comes good benefits like having more job offers since employers will view your credit score as a reflection of your character. For students who have good grades but have not managed their credits wisely they are in for a bad surprise.
Home and car loan lenders will be willing to give you a much friendly interest rates. These lenders view responsible credit use as your being a responsible driver and home owner. Most of us cannot pay in cash so paying for mortgage loans is a big worry hence the need for a higher credit score which can assure you of lower mortgage rates. Basing credit worthiness on credit scores in truth is supposed to be not the only basis but lenders are often guilty of doing this.
Good article, thanks. My score isn’t quite so bad, but I’m in the relatively same shoes. If only I could convince my wife now that we’re not doing well… onward and upward.
This is for all young kids. I have a great credit score. I never bought or charged anything that I could not afford to pay for with cash. I was the first person in my family to pay cash for a brand new car. I could not understand why someone would make payments and end up paying 1 1/2 more than the sticker price for a car that would drop hundreds in value the minute you drove it off the lot. My family and friends were shocked when I did it, but none of them have ever had a car loan since. MY motto is IF YOU CANNOT AFFORD IT, YOU CANNOT HAVE IT. Start Saving for what you want.
Great article! I find that a good credit score is indeed a relative term. Sure, if you have a 720 credit score or plus, that’s pretty much accepted as good anywhere you go. However, as the economy goes up and down, a good credit score means different things to different people and companies.