What Is a Credit Score and Credit Score Range

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What we’ll cover:

  • The factors that affect your credit score
  • What credit scores are used for 
  • Credit score ranges
  • How to check your credit score

It’s only natural to have a lot of questions about your credit score.

First, you want to know how to check your score. 

Then you need context for what it means: is 700 a good credit score? 750? 800? You might have other questions about credit scores such as what credit score is needed to buy a car or what credit score is needed to buy a house.

And finally, you want to understand what factors make up your rating, what you can do to optimize your score and why it all matters. 

We’ve created this guide to help you get familiar with credit scoring and learn more about credit score ranges, and which category you fall into.

What is a credit score?

Simply put, a credit score is a three-digit number lenders use to assess how likely you are to pay back loans and credit based on your financial track record. 

Many lenders use the FICO score, created by the Fair Isaac Corporation, making it something of an industry standard for measuring consumer credit. Here’s a breakdown of the factors affecting your FICO score:

Payment History (35%): Measures the timeliness of past payments and the severity of missed payments.

Amounts Owed (30%): Measures the percentage of your total available credit you’re using.

Credit History Length (15%): Measures the length of time your accounts have been open and how long it’s been since their last actions.

Amount of New Credit (10%): Measures how many new accounts you’ve applied for and opened recently.

Credit Mix in Use (10%): Measures the types of credit you carry.

Another popular credit rating, the VantageScore, uses many of the same factors weighted a bit differently: payment history, credit age/mix, credit utilization, balances, recent credit applications and available credit. 

Why does your credit score matter?

This number, falling between 300 and 850 for FICO’s rating, can determine which lines of credit you get approved for throughout your lifetime – and how much interest you’ll pay on them to boot . 

Why? Lenders look at your credit score when they’re gauging the likelihood of you paying back the money you’ve borrowed.

The higher your credit score, the better interest rates you’ll generally be able to get on loans.

In some states, insurers even factor in your credit score when setting your premiums; a higher score can help you save money here.

Credit score ranges: which category do you fall into?

More important than your exact score is your credit score range. Although FICO ratings and VantageScore ratings both operate on a scale where the lowest credit score is 300 and the highest credit score is 850, they divide their ranges a bit differently.

Here’s a breakdown of FICO credit score ranges:

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

What’s the average credit score on this scale? According to FICO, 704 was the average rating in 2018.

And here’s a breakdown of VantageScore credit score scale:

  • Very Poor: 300 – 499
  • Poor: 500 – 600
  • Fair: 601 – 660
  • Good: 661 – 780
  • Excellent: 781 - 850

The average credit score on the VantageScore scale was 680 in 2018 according to Experian.

The general takeaway here is that having a good credit score or an excellent credit score will increase your chances of securing loans at competitive rates.

Having a “fair” credit score means you may get approved for lines of credit, but you’ll have to pay more in interest. Having low credit means it will be trickier to get approved for certain loans, and you’ll pay more to borrow.

How to check your credit score

You’re entitled to check your credit report with each of the three major reporting bureaus – Equifax, Experian, and TransUnion – once every 12 months for free. And, you should absolutely take advantage of this opportunity.

You can also keep closer tabs on your credit score throughout the year using the Clarity Money app. Monitoring your score regularly will help you notice and dispute errors faster – like identity theft or a drop in your score. Knowing where you stand will also help you make smart choices regarding when and where to apply for which lines of credit.

Beyond providing credit score visibility, the Clarity Money app gives users insight into their spending habits and recurring expenses. Building a track record of timely payments for bills and credit accounts is, of course, an important step for driving creditworthiness. 

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Optimizing your credit score

Overall, the longer your credit history and timelier your payments, the better your score will look. To improve your credit score, it’s also advantageous to avoid maxing out your available credit and applying for too much new credit in a short span of time .

Ask yourself: How much of the total credit available to you are you using? 

This is your credit utilization ratio, which is calculated by dividing your outstanding balances by the total credit lines available. Experts generally recommend keeping your credit utilization no higher than 30%.   

Paying off some of your existing balance is one way to improve your utilization ratio, which can in turn lift your credit score. Try to keep your utilization per card and your overall utilization ratio low.  

Optimizing your credit begins with understanding your credit score. So keep monitoring your credit score and asking questions as you go.

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Marcus by Goldman Sachs® and Clarity Money® are both brands of Goldman Sachs Bank USA.This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.