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What is a credit Score and What are the Credit Score Ranges?
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What is a Credit Score and what are the Credit Score Variables?
Credit scores are a measure of your chances of being able to repay new debt. Scores of 690 or above are typically considered to have good credit.
By Amanda Barroso Lead Writer | Budgeting, credit scoring personal finance Amanda Barroso is a personal finance journalist she has joined NerdWallet in 2021, covering credit scoring. She has also written research studies on data and also participated in NerdWallet's "Smart Money" podcast. Before joining the team, Amanda worked for more than 10 years covering the issues that affect the majority of Americans, which includes writing at the Pew Research Center as well as a policy analyst at the National Women's Law Center and an instructor at a college. Amanda obtained a doctorate at The Ohio State University.
and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's degree in journalism from Auburn University and a master's in education from Georgia State University. Prior to joining NerdWallet she worked for the daily papers, MSN Money and Credit.com. Her work was featured throughout the world in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and elsewhere. Twitter: @BeverlyOShea.
Updated on Mar 28, 2023
Edited by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years working at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Previous experience included news and copy editing for a variety of Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communication and journalism in The University of Iowa.
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Credit scores influence many aspects of your life: the amount you can get from an loan or credit line, the rate of interest you pay, or whether you get an apartment you want.
Higher credit scores could allow you to access many credit options as well as at lower rates of interest. Creditors with scores of 700 or more often have several options, including the possibility of obtaining no-interest financing for cars and credit cards with 0% introductory interest rates.
It's important to know how credit scores work and what the ranges of credit scores are.
What is credit score?
Credit scores are a three-digit number, typically on a scale of 300 to 850. It indicates how likely you are to pay back borrowed funds and pay bills.
Scores for credit are calculated using information about your credit accounts. The information is collected by credit-reporting agencies, also called , and then put into your credit reports. The three biggest bureaus comprise Equifax, Experian and TransUnion.
You don't have one credit score. Instead, you have several, and they may vary slightly. This is because two large businesses calculate their scores. More on that in the following.
The best credit score you can receive is 850. However, there isn't much difference between the "perfect" score as well as an outstanding score when it comes to the rate and the types of products you are eligible for. In other words: Don't worry about trying to get an 850 credit score, particularly because scores tend to fluctuate regularly.
Find out how your credit is evaluated
See your free score and the variables that affect it, and get insights into ways to keep building.
How can you tell the different in FICO scores and VantageScore?
Two companies dominate credit scoring. It is the most well known score. Its primary competitor is . In general, both companies use the credit score range of 300-850.
Every business has different versions of its scoring model, too. The scoring models used most often include VantageScore 3.0 as well as FICO 8.
FICO and VantageScore pull from the same information, weighing the information slightly differently. They generally move in tandem If you have a great VantageScore score, your FICO will likely be also high.
Why are My FICO score and VantageScore different?
Scores are snapshots and the score can fluctuate each time you check it. The score you receive will vary based on the credit bureau that supplied the credit report data used to create it or even the bureau provided the data. Not every creditor sends transactions to all three bureaus, which means your credit report from each one is unique.
What are the credit score ranges?
Creditors set their own standards of what they'll accept as credit scores However, these are the general guidelines:
If the score is 720 or greater is generally considered
A score between 690 and 719 is considered .
Scores of 630 to 689 are .
Scores of 629 or lower are
Alongside your score on credit, other factors such as your income and other debts can influence creditors making decisions on whether or not they will approve your application.
Did you know...
The score in America United States varies a bit between the two major scoring models. The average FICO 8 score stood at 716 in August 2022. This was similar to the score a year earlier. (0) FICO Choices Blog . . Accessed Aug 30, 2022.
The VantageScore 3.0 Average was 695 at the second quarter of 2021.
What factors impact how your scores on credit?
The two primary scores for credit, FICO and VantageScore, consider many of the same variables, however they weigh them slightly differently.
The two things which matter the most are:
Making payments on time. A misstep here can be expensive. Any time you're at least 30 days over the due date will remain on your credit record for years.
What amount of money you have to pay. Credit utilization is the percentage of your credit limits you are making use of. It is recommended to limit your use to less than 30 percent of your credit limit -- lower is better. You can take several steps to
A lesser amount of weight is given to these variables However, they're worth watching:
The longer you've been in credit and the greater the average age of your accounts the better your score.
Credit mix Credit mix: Scores reward the ability to have more than one type of credit, such as the traditional loan and a , for instance, a.
How recently you have applied for credit: If you apply for credit, a may result in a temporary drop in your credit score.
Things that won't impact your credit scores
There are some things which are not considered in credit score calculations, and these mostly have to do with demographics.
For example your race or ethnicity, sexual status, or age don't count as part of the equation. Neither is your employment history -- which can comprise things like your pay and titleand also the location you reside in.
How can you improve your credit score?
What does your credit score measure? In one word: creditworthiness. But what exactly does this mean? The credit score you receive is a way to gauge your financial behavior. The factors that are incorporated into your score can also provide reliable ways you can improve your score:
Be sure to pay your charges on time.
Keep credit card balances under 30percent of the limit and, in the ideal case, much less.
Keep old credit cards in your account to protect the average age of your accounts, and think about using a mixture of credit cards and installment loans.
Spread out credit application forms instead of applying for a lot within a short amount of time. Usually, lenders initiate an "hard pull" on your credit report when you make an application, which will temporarily affect your credit score. A lot of applications to each other could cause further damage.
There are several options to consider when beginning your journey and methods to after you've established your score. Doing things like making payments towards your account balances a few times during the month and requesting higher credit limits could boost your score.
What can I do to check and track my credit?
You can check your own credit -- it -- and know what the lender is likely to look at.
You can get a credit score from a personal finance site such as NerdWallet, which offers a TransUnion VantageScore 3.0. Many personal banking apps also provide credit scores for free and you should make it a the habit of checking your score when you log in to pay your bills.
It is important to keep the same score every time you take a look. Doing otherwise is like trying to monitor your weight on different scales , or even switching between pounds and kilograms. So, pick a score and get an action plan for monitoring your credit. The changes that are analyzed by one score may be reflected in the others.
Keep in mind that, as with the weight of your body, scores change. As long as you remain within a healthy range, those variations won't have an impact on your financial wellbeing.
You can safeguard your credit by contacting each credit bureau. You are still able to use credit cards, but no one can apply for credit using your personal data because access is denied when your credit is frozen. Freezing your credit is free and takes only a few minutes, but it goes a long way in protecting your finances.
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About the authors: Amanda Barroso covers consumer credit and debt for NerdWallet. She previously worked for Pew Research Center. Pew Research Center and earned a doctorate at The Ohio State University.
Bev O'Shea was a former credit writer at NerdWallet. Her work has appeared in the New York Times, Washington Post, MarketWatch and elsewhere.
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