What Is a Good Credit Score?

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What Is a Good Credit Score?

A good credit score typically ranges from 670 to 799 for a FICO score. It is near or above average for the typical U.S. consumer and indicates to lenders that a borrower is a lower financial risk than most borrowers and is therefore creditworthy.

Why Is a Credit Score Range Considered Good?

The terms “good” and “very good” refer to the credit-scoring model set forth by the Fair Issac Corporation’s FICO system. In this system, a 670 to 739 credit score is considered to be “good.” A score of 740 to 799 is considered to be “very good.” A FICO score can range from 300 to 850.

How Is a Good Credit Score Assigned?

Your credit score is a three-digit number that essentially summarizes the information that is contained in your credit report. Since your credit report is regularly updated to reflect information regarding your credit accounts as submitted by your creditors, your credit score also changes.

There are 5 major components that go into calculating your credit score and include your payment history, credit mix, credit utilization, and the length of your credit history, and new credit accounts. However, they are weighed in different ways depending on the credit scoring model (FICO versus VantageScore model).

As a result some models may mean that you have a score that is a “good” credit score in one model while in another you could have just a “fair” or maybe even an “excellent” credit score in another model.

What Is the Advantage of a Good Credit Score?

Regardless of how your good credit score is calculated, it means that statistically you are less likely to pay late or become delinquent on loans. As a result, lenders such as banks, credit card companies, and auto lenders are likely to offer you approval and more favorable terms which can save you thousands.

However, the specific “good” score you need to obtain better terms will depend on the lender and the loan.