What Is a Good Credit Score?

Your credit score is a critical piece of your financial puzzle, especially when buying a home. Learn about the basics, including the score range, different credit scoring models, and what counts as good credit.

What is a credit score?

A credit score is a three-digit number, typically running from 300 to 850. It summarizes your creditworthiness based on information in your credit reports. Lenders use credit scores to assess how likely you are to repay a loan. A good score indicates that you are more reliable to lenders. On the other hand, a spotty payment history or lower credit score indicates that you are higher risk.

How to check my credit score

You can check your credit score through several free and reliable resources. Many credit card issuers offer free score monitoring — when you check your credit card balances, look at your score, too.

Financial apps like Experian’s app or Credit Karma also provide free updates and tools to track your credit score range, credit utilization, and other key factors. However, it’s important to note that these apps may not use the same scoring model as lenders. For example, Credit Karma uses VantageScore 3.0, while many lenders rely on FICO scores or the newer VantageScore 4.0, which was recently approved by Fannie Mae for mortgage credit checks.

These apps can still be helpful for general credit monitoring and spotting changes, especially if you enable push notifications to alert you of score updates. But if you’re preparing for a loan application, it’s a good idea to check your FICO score or speak directly with a lender for a more accurate picture of what they’ll see.

Credit score ranges (300 to 850)

Credit scores range from 300 to 850. The higher your score, the better. Here’s a quick breakdown of the ranges:

• 300 to 579: Poor
• 580 to 669: Fair
• 670 to 739: Good
• 740 to 799: Very Good
• 800 to 850: Exceptional

Your length of credit history, the types of credit accounts you have open, and your card utilization rate all impact your score. Your payment history is also a major factor, so make sure you are making payments on time.

Lenders use credit scores to gauge the risk of lending you money. A higher score signals that you’ve managed your credit accounts responsibly. On the other hand, a lower score might result in higher rates or even difficulty getting approved.

Lenders also use your score to determine what credit limit to offer you for things like credit cards. Your score directly impacts how much you pay to borrow money and how favorable the terms are.

After all, lenders don’t want to lend money to people who are unable to pay back. That’s bad for their bottom line.

People who achieve and maintain good credit can typically borrow more money at a cheaper rate. That means they will pay less interest over the life of the loan, which can lead to huge savings. Achieving a low rate is especially beneficial when financing a costly item like a home or vehicle.

Now that you know the basics, here’s an explanation of what makes a credit score “good” and how it benefits you.

Credit score ranges explained

A good credit score between 670 and 739 shows lenders you’re a reliable borrower. But going further by aiming for a very good or exceptional score can unlock better loan terms. Some of the most favorable loan products are available only to people with scores of 740 or higher.

For example, a person with a score of 579 or lower may not qualify for a mortgage at all. On the other hand, a person with a score in the fair range may qualify for some loans, such as FHA mortgages. However, they may pay a higher rate.

Individuals with good credit will qualify for most conventional loans and receive competitive terms. People who reach the very good or exceptional range have access to some of the lowest rates and best terms.

How a good credit score benefits you

A good credit score can save you thousands (or tens of thousands) over the life of your mortgage. The biggest differentiator is the interest rate. A difference of just one percent of interest can reduce your payment by $200 to $300 per month or more. That’s $2,400 to $3,600 of savings per year.

Good scores also open the doors to loans with lower down payment requirements. You can get approved faster and unlock long-term savings.

Want to see how your score stacks up? You can talk to a lending professional or get pre-approved to see what rates you may be eligible for.

Several factors influence your credit score. All of this information is included in your credit reports and used by the credit reporting agencies to calculate your three-digit number. Here are the most important variables you need to consider:

• Payment history: Paying bills on time is the biggest factor; late payments can hurt your score significantly
• Credit utilization: This is the ratio of your credit card balances to your limit
• Length of credit history: The longer your accounts have been open, the better
• Types of credit: A mix of credit cards, loans, and mortgages can boost your score
• New credit inquiries: Opening multiple new accounts in a short time can lower your score

By managing these factors, you can maintain or improve your credit score over time. Focus on your payment history and credit utilization first, as they make the biggest impact on your score.

Building credit takes time. Here are some tips to jumpstart your efforts:

• Pay your bills on time
• Lower your credit card balances to reduce your utilization rate
• Avoid opening new accounts before applying for a mortgage
• Dispute any errors with the credit unions
• Don’t close old accounts unless you have to, because a longer credit history improves your score

These small, consistent actions can lead to big improvements in your score. The result? Better odds of qualifying for favorable mortgage terms.

What is the max credit score?

The maximum credit score you can achieve is 850. Few people hit a perfect score, but anything above 740 is usually enough to secure a great mortgage rate.

What is the average credit score?

As of early 2024, the average credit score in the United States was 705. While that’s a solid score, lenders often expect you to be in or close to the very good range (740 to 799) to qualify for the optimal terms available. However, there are plenty of great loan programs out there for individuals with good or even fair credit.

Do medical bills affect your credit score?

Medical bills typically don’t affect your credit score unless they go to collections and are reported to credit bureaus. Recent changes in scoring models may exclude paid or small medical debts. However, unpaid collections can still lower your score.

What credit score do you start with?

You don’t start with a credit score. The reporting bureaus will generate a score once you open your first credit account, such as a student loan or credit card. Your activity is reported to the credit bureaus, and you’ll start building a credit history.

Now that you know what a good credit score is, it’s time to take control of your financial future. Use the tips above to build a strong credit history and boost your score. Over time, you can work toward a very good or exceptional credit rating. A strong score will make it easier to qualify for a mortgage and receive favorable rates.

Ready to take the next step? Connect with CrossCountry Mortgage or apply today.