Financial Tips

Understanding What Makes a Good Credit Score

Discover what goes into a good credit score and how it influences financial decisions.

Written by Intuit Blog team
Published Oct 23, 2024
7 min read

What is a good credit score?

Your credit score influences many aspects of your financial life. Above all, it can determine your eligibility for credit cards, car loans, home mortgages, apartment rentals, and even certain jobs.

Knowing what a good credit score is and understanding the different tiers of scores is helpful in deciding what loans to apply for. Knowing how just credit scores work is also useful if you’re taking steps to increase your score.

In this article, we’ll discuss what is considered a good credit score according to two of the most important scales: FICO^® and VantageScore. We’ll also explore the benefits of a strong credit score.

What is a good FICO^® score?

There are different credit scores based on different credit models, but the most common credit score lenders and other business entities use is the FICO score, which ranges from 300 to 850. It was created by the Fair Isaac Corporation in 1989.

From a lender’s perspective, the lower a consumer’s number on the FICO scale, the higher the risk. Lenders will often deny loan applications from those with lower credit scores because of this risk. If they do approve a loan application, they’ll make consumers pay for the extra risk with a much higher interest rate.

Within the 300–850 credit score range are tiers ranging from bad to excellent. Here’s how the FICO credit score range breaks down:

Exceptional (800+): Consider your credit score excellent if your number falls within this bracket. You’ll be able to take advantage of fringe benefits that come with credit cards and will almost certainly be approved for loans at the lowest interest rates possible.
Very Good (740-799): Credit scores in this range are considered above average and often qualify for fairly low rates. If you fall within this credit score range, you shouldn’t have much trouble finding loans and lines of credit to finance purchases.
Good (670-739): Scores within this bracket are considered good, although it’s advisable to keep your score above 700 to get the best interest rates on loans.
Fair (580-669): This is considered an average score. Lingering within this range is most likely the result of having too much “bad” debt, such as high credit card debt that’s grazing the limit.
Bad credit (300-579): Any number of things could land you in this category—a string of late or missed credit card payments, maxed-out credit cards, or even bankruptcy. Or you might wind up here due to a lack of activity. Younger people with no credit histories will probably find themselves in this category until they develop their credit.

To generate credit scores, FICO uses information from the three major credit bureau agencies that house credit histories—Equifax, Experian, and TransUnion.

Each of the three bureaus uses FICO’s algorithm to create their own versions of the FICO score. There are multiple FICO scores for each bureau. Lenders request different versions of the FICO score when assessing applications. The precise version they choose is often industry-specific (mortgage, auto loan, credit card, etc.).

FICO^® score factors

A FICO score is calculated by considering several factors. Each contributes a specific percentage of the overall score. Here’s the breakdown:

Payment history (35%): Your track record of past payments is the most important factor in determining your likelihood of paying off a debt.
Amounts owed (30%): What determines whether you’re overextending is not the total amount of debt you owe but the percentage of available credit you’re using (known as the credit utilization rate).
Length of credit history (15%): This includes the length of time you’ve kept your oldest account, the average age of all your accounts, and the length of time since you last used your accounts.
Credit mix (10%): Managing different categories of loans and lines of credit (e.g., consolidation loans, mortgages, credit cards, etc.) will increase your score.
New credit (10%): Applying for too many lines of credit in a short time (1–2 years) can hurt your credit score.

What is a good VantageScore?

VantageScore is a credit scoring model introduced by the three credit reporting agencies (Equifax, Experian, and TransUnion) in 2006.

Information from all three credit bureaus factors into your VantageScore. The latest version uses the same score range as the FICO—300 to 850, with scores between 661 and 780 considered good.

If you want to know what is a good score for credit according to VantageScore, here are its ranges:

Superprime (781 to 850): This is the best rating and is associated with strong financial responsibility. Lenders often give the best interest rates and loan terms to superprime borrowers.
Prime (661–780): Prime credit is still good, and you should have an easy time getting approved for loans at good interest rates.
Near Prime (601–660): If you fall into this bracket, lenders will have a harder time trusting you with their loans.
Subprime (300–600): Scores in this range are associated with higher credit risk. If you’re in this bracket, you’ll likely face higher interest rates and fees. Your selection of credit cards might also be restricted.

VantageScore factors

Unlike the FICO score, which is calculated based on five factors, VantageScore uses six. They’re also weighted differently. Here’s how VantageScore 4.0, the scoring model’s most recent version, breaks down:

Payment history (41%): Your record of on-time payments is even more important to VantageScore than FICO. Consistent, on-time payments are the most important factor in building credit history.
Age/credit mix (20%): This factor considers both the age of your credit accounts and the variety of credit types you have. A longer history of different credit types will increase your score.
Credit utilization (20%): This measures the percentage of your available credit that you’re currently using. The lower, the better.
Recent credit (11%): This factors in how many new credit accounts you’ve opened recently. Applying for several new loans in a short period drops your score by a few points.
Balance (6%): The total amount of money you owe on all your credit accounts, both current and delinquent. The higher your balance, the lower your score will be.
Available credit (2%): The total amount of credit available to you on your revolving credit accounts (such as credit cards). Higher available credit can increase your overall score slightly.

What is the average credit score?

According to Experian, the average FICO score in the United States was 715 in 2023. That’s one point higher than the previous year. This score falls within the “good” range, indicating that, despite rising inflation and higher interest rates, many people are not overextending themselves and are prioritizing paying off existing debt.

What is the best credit score, and how many have it?

The highest score possible, according to both the FICO and VantageScore scales, is 850. Only 1.7% of people achieve a perfect score. It takes a decades-long credit history (usually about 30 years), minimal credit utilization (4.1% on average), no late payments, and minimal hard credit inquiries.

However, you don’t need the highest credit score to get the best deals. A score of 800 or higher already qualifies consumers for the best terms. And it’s much more achievable—24.1% of people reach this level.

What affects your credit score?

Several factors play a role in your score. In particular:

Payment history: This is the most important factor. Always pay your debts on time. Late or delinquent payments severely hurt your score.
Credit utilization: Another critical factor—try to keep your credit utilization rate under 30% at all times.
Length of credit history: A longer credit history generally boosts your score, and that’s why building a good credit score starts as early as age 18.
Types of credit: Having many different credit accounts (e.g., installment loans, revolving credit) can positively influence your score.
Recent credit activity: Applying for multiple loans in a short time will lower your score temporarily.

Financial benefits of a good credit score

There are many advantages to having a good credit score, such as:

Lower interest rates on credit cards and loans
More room to negotiate
Better chance for credit card and loan approval
Easier approval for renting
Better car insurance rates
Get approved for higher borrowing limits
Get utility services more easily

Maintaining a good credit score

It’s never too early to start prioritizing good credit. A high credit score opens the door to endless opportunities. Now that you know what a good credit score is, start building it today.

If you want to learn more about your credit score and how it impacts your finances, check out our Intuit for Education, our free financial literacy curriculum. It’ll help you learn financial basics and best practices.