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What is a good Credit Score?

The Definitive Guide (2019)


Figuring out what a good credit score is can become confusing fast. 


But did you know that there are only a few different credit score models and they are pretty similar?


In this post I will answer the question what is a good credit score in 2019 and show you how to get your own.

free credit score

CHAPTER 1:

What Is A Good Credit Score?


My friends have asked me this same question I always have responded with the same answer...

It depends on the type of score and what you are trying to obtain.

The two most important scores at the moment are the FICO Score and the Vantage Score.  Below we discuss what a "Good Score" for each of them is. 

what is a good credit score

What Is A Good FICO Score? 

The FICO score was created by the Fair Isaac Corporation in 1956 and has become the score of choice for over 90% of lenders. 


The FICO score ranges from 300 up to 850; however, with the Fico scoring model, anything above a 670 is deemed a good credit score.

fico logo

If you are below a 670, you are going to be considered to have poor, fair, or sub-prime credit, and if your score is above 800, it is deemed to be excellent credit.


I would say a good range to shoot for is a 750 if you want to have a good and robust score; below we list the score ranges:

Score

Rating

% Of People

APR/Rates Impact

Risk

800-850

Exceptional

21%

Will Receive Best Rates From lenders.

Very Low

740-799

Very Good

25%

Will Receive Above Average Rates.

Low

670-739

Good

21%

Will Receive Average Rates

Medium

580-669

Poor

17%

Considered Sub-Prime Borrowers 

High

300-579

Very Poor

16%

Will Be Hard To Get Approved 

Very High

Quick Note:


Today more than *180 million consumer accounts have free monthly access to credit scores.  

What Is A Good Vantage Score?

vantagescore logo

The VantageScore is a relatively new type of credit score that more lenders are starting to use.


In the past, credit scores like the VantageScore were considered to be what is known as a FAKO score. 


This was because they were not used by any lender to determine if you would be approved for anything.

This meant that looking at any score other than the FICO score was a complete waste of time.

But things are changing:

The VantageScore was created by the 3 major credit reporting agencies, which are Equifax, Transunion, and Experian. 

Each score has a different version that calculates the scores differently, and the VantageScore 3.0 version is what’s currently being used.

Their ranges go for the VantageScore are 300 to 850, and anything above a 661 is considered a good score.

As you can see below, the Vantage Score requires a lower score to be considered as having a good credit score:

Score

Rating

% Of People

APR/Rates Impact

Risk

781-850

Exceptional

23%

Will Receive Best Rates From lenders.

Very Low

661-780

Very Good

38%

Will Receive Above Average Rates.

Low

601-660

Good

13%

Will Receive Average Rates

Medium

500-600

Poor

21%

Considered Sub-Prime Borrowers 

High

300-499

Very Poor

5%

Hard To Get Approved For Credit

Very High


Do Lenders Prefer VantageScore Score or FICO® Score?

There doesn’t seem to be any data that proves a lender prefers one scoring method over the other. 


However, each specific lender will use one score over the other when making a decision on approving your loan or credit application.


From my experience, neither of these scores will match each other, so be sure not to assume your FICO score is close to your VantageScore or vice versa.


The reason for this is that they both calculate your score with a different formula as shown below: 


fico vs vantagescore

Image source: badcredit.com

As we stated above, FICO reports that 90% of lenders are using the Fico Score to decide if they will loan money to a borrower. 


However, in 2018, VantageScore released a study stating that around 10.5 billion Vantgage Scores were used from 2017 to 2018.


VantageScore states that 4.4 billion of the VantageScores were used by credit card companies. 


They also say that their score is being used for things like auto loans, mortgages, and personal loans, as well. 


However, I have found that most of my approvals, from credit cards to car loans, have come from all the different Fico Credit Score Models.


But get this: 


I bet you didn’t know that you have a different Fico Score for Mortgages, Auto Loans, and Credit Cards. 

multiple fico scores

If you find that your lender uses the VantageScore, you may be in luck because you can actually get a Vantage Score with a smaller credit profile. 


Overall, If you are wondering which score to monitor, I would go with the FICO Score because almost everyone uses them. 

 

However, it’s essential to ask a lender what credit score model they will use to make a decision on your credit before you apply for any type of loan.

CHAPTER 2:

Why Credit Scores Matter?


Credit scores give your lender an idea of how likely it would be for you to repay your loan on time or if you would ever pay it at all.


Without a good credit score, you might not be able to apply for a car loan or even a home loan. 

why credit scores matter

And guess what: 


Some jobs will even check your credit score, especially in the financial space, to determine if they will even hire you.


If you can't manage your money correctly, why would they let you manage other people's money?


The thing about having poor credit is that even if you get approved for a loan, your interest rates can be super high. 


Higher interest rates can price you right out of being able to afford the items you were trying to get a loan for in the first place. 


The interest could easily be the difference between spending thousands or more or saving thousands or more for the same item. 


A good credit score also puts you into a position of being able to get a cell phone, rent a home, or even rent a car. 

good credit vs bad credit

Now, here's the thing:


The good thing about your credit score is that it is updated and recalculated every time a lender requests it or as your credit report changes. 


The better your credit report becomes, the better your credit score will become and vice versa. 


Any time you plan to make a significant life move like getting a business loan, buying a home, or buying a car, you are going to need a good credit score. 


But keep in mind that your credit score is just one part of the overall lending decision when lenders are deciding if they should give you credit. 


You can have a good score, but your credit report could show that you are maxed out on a few credit cards, which could change your interest rate or even your approval odds. 


For example: 


A friend of mine applied for a $70,000 auto loan with a 730 credit score. 


They had paid off a car before with a loan amount of $30,000 and never had a late payment. However, they were declined for the loan and guess what the reason was…


Lack of history for an auto loan of $70,000!


It sounds odd, but some lenders will look at your profile and not extend credit if no one else has given you similar credit.


Of course, they eventually got a loan with a lender, but the example is to show you that your credit score is just one part of lenders' underwriting decisions.


This is why it is crucial to have a strong credit report and a good credit score. 

Your Insurance Score Also Matters

When you apply for homeowner's insurance or car insurance, did you know that they are going to pull your insurance score to help determine your premiums?


Your insurance score is calculated precisely like your credit score when it comes to risk. 


However, it is only used to determine the probability of you filing an insurance claim.


Studies have actually shown that if you have a low credit score, you are at a higher risk of filing a claim.

insurance score example

Just like with a credit score, your insurance score is only one part of the overall approval process for your insurance, but you shouldn't ignore it. 


Having a reliable insurance score can help keep your monthly insurance premiums lower and save you thousands of dollars over time.


You can get a better insurance score by not regularly filing claims and by having a good credit score. 


Your credit score is a part of your insurance score calculation, so the better your credit, the better your insurance score.

CHAPTER 3:

What Affects Your Credit Score?


Learning about credit can be overwhelming, especially when you start to learn about all of the factors that determine your credit score.

However, once you learn how each factor works, you can use it to your advantage to get a very good credit score.

what affects your credit score

Payment History

No matter which scoring model you are considering, having a history of late payments is going to affect your score more than any other factor.

Your score will be affected depending on how late you are, which can be 30, 60, 90 or even 120 days late as you can see below: 

credit report payment history

At 90 days late, you will probably hit maximum score damage for this specific factor in regards to the FICO score, and anything past that likely won’t affect your score. 

Still, it will affect how a lender views you.

If you want a good credit score, you have to make on-time payments for all of your credit or loan items.

Even if you can only afford to pay the minimums, it’s better to have them paid than ever to be late on anything.

Credit Utilization Rate

Credit utilization is one of the most undervalued factors when it comes to having a high credit score.

I think it might be so underrated because most people don’t know how it works, but it is pretty simple as you can see in this quick infographic from the MSU Federal Credit Union

credit utilization ratio

Just think of it as the (how much credit am I using) factor.

This factor takes your total available credit and divides it into how much you are using to get a credit utilization ratio. 

You have a credit ratio for each of your individual credit accounts, as well as your total credit profile.

For example: 

If you have 3 credit cards that all have $2,000 limits, you can have a mix of utilization as we show below:

Credit Item

Credit Limit

Amount Spent

Utilization %

Credit Card 1

$2,000.00

$1,800.00

90%

Credit Card 2

$2,000.00

$500.00

25%

Credit Card 3

$2,000.00

$0.00

0%

Totals

$6,000.00

$2,300

38%


Now, a 38% total credit utilization is still higher than the recommended ratio of 30% or less, even better if you can keep it below 10%.

What’s even worse is that in the above example, you have 1 card that has a 90% utilization.

If you find yourself in the above situation, you should focus on paying down the card with the highest utilization first because it will kill your credit score.

Age Of Credit Accounts

This factor, which is often referred to as the AAOA or Average Age Of Accounts, is the only factor out of all the factors that not much can be done about.

This factor is about how long you have been using your credit.


Basically, it’s the age of your oldest credit account, newest accounts, and the average ages of all the accounts on your credit file. 

average age of accounts

It is vital to keep your oldest accounts open for as long as possible, even if you aren’t using them.

This is because if the oldest account falls off your report, it will shift your average age of accounts and affect your credit score. 

It’s also best to get as many accounts as possible at the same time so that your average age of accounts grows in bulk.

You want to have all of your accounts to be at least 1 year old.

Type Of Credit Account (Account Mix)

The more types of accounts you have, the better; this is because creditors like to see that you can handle different payment types. 


It’s also great because it’s a factor when determining your credit score.

credit mix

There are several types of accounts you can have, which are: 

  • Credit Cards (Revolving Account)
  • Line Of Credit (Revolving Account)
  • Store Card (Revolving Account)
  • Personal Loan (Installment Account)
  • Mortgage Loan (Installment Account)
  • Auto Loan (Installment Account)

Each of these accounts can be either an installment account or a revolving account.


Installment accounts are loans that have a fixed monthly payment for a certain period like our car loan, personal loan, or mortgage. 


Revolving accounts are things like credit cards, store cards, and lines of credit that once you pay them off, you can use them again; basically, they revolve.

Number Of Credit Inquiries

There are two types of inquiries that you can get, a hard inquiry and a soft inquiry.

When it comes to credit, the only inquiry you should be concerned about is a hard credit inquiry because those are the ones that count against you.


Lexington Law created a great graphic about the differences: 

credit inquiries

Hard Inquiries are caused when a lender looks at your credit report after you applied for credit.

In the FICO score model, these hard inquiries will only affect your score for 12 months, but they will stay on your report for 2 years.

Soft inquiries are caused when you look at your own credit or when an employer is checking your credit for employment.

You also see a ton of soft inquiries when you are trying to get a credit card pre-approval.

Do your best not to get any hard inquiries, I always suggest requesting a soft credit pull for a credit limit increase instead of getting a new credit card.

Quick Note:


The cool thing is that during 30 days from when you first start shopping for an auto loan or mortgage, you will only be dinged for 1 hard inquiry. 

Collections & Public Records

A collection or a judgment on your public record are two of the worst things you can have hit your credit report.

These are considered negative items on your credit report and will affect your score as well as your credit report.

collections on a credit report

When a lender sees anything in these sections of your credit report, a ton of red flags come up.

You usually get these items on your credit when you have failed to pay a bill or had a judgment placed on you, such as a Tax Lien. 

If you have any of these items, be sure to request it be deleted from your report once you have made the payment or (Pay for delete).

When it comes to things such as tax liens, you may need to speak to someone about tax relief. 

To have the best credit score possible, you need to avoid these types of items reporting to your credit like the plague. 

FICO® Score Factors:

Below is a quick list of which factors are most important when trying to increase your FICO score: 

  • Most Important: Payment history on any credit account
  • Highly Important: Total debt utilization and amounts owed
  • Moderately Important: Length of credit history
  • Less Important: New credit and credit mix 

VantageScore Factors:

Below is a quick list of which factors are most important when trying to increase your Vantagescore: 

  • Most Important: Payment history on any credit account
  • Highly Important: Age and type of credit, percent of credit limit used
  • Moderately Important: Total balances and debt
  • Less Important: New credit, available credit, and inquiries 

Factors That Don't Affect Your Score

Below is a list of factors that won't affect your credit score: 

  • Race​​​​
  • color
  • religion
  • national origin
  • sex or marital status
  • Your age
  • Your salary
  • occupation
  • title
  • employer
  • date employed or employment history
  • Where You Live

CHAPTER 4:

How To Improve Your Credit Score


Improving your credit score doesn't really take that much skill as long as you don't try to rush the process. 


There are only a few things you need to do when it comes to seeing an increase in your score. 


Below we go over the different ways you can improve your score that you might not be familiar with. 

how to improve your credit score

Request Credit Limit Increases

Now, you're probably thinking what in the hell does asking for a credit limit increase have to do with improving your credit.


Let me explain: 


First, one of the most significant reasons people don't see an increase in their credit score is because they are utilizing too much of their credit. 

credit limit increase request

When this happens, creditors see this as you extending too much of your credit, and your credit utilization is also a factor that helps determine your credit score. 


If you get a credit limit increase (soft credit pull only), then you will instantly decrease your utilization and see an increase in your credit score. 

Pay Your Bills On Time

I get it, it sounds effortless, but when we say pay your bills on time, we mean it.  


The fastest way to increase your score is to show a strong history of bills that have been paid on-time. 

pay your bills on time

Wallet Hub had this super funny graphic about paying bills on time. 

And here is the crazy thing: 


Usually, after 2 years, if you have any late payments, it won't affect your score as much regardless of which credit score model you are focusing on.


The most important thing is that you can always start paying on-time today, the sooner you do this, the better your score will become. 

Submit Applications In Bulk

When you apply for credit, your score shoots down every time you click the apply button. 


This is because you are requesting credit and obtaining hard credit inquiries. 


These inquiries are going to last for 2 years, so it's best to get them all at 1 time by applying for multiple accounts in bulk. 

apply for credit in bulk

You also have a much better chance of getting approval because none of these new accounts would have hit your credit. 


Creditors can only see that you applied for credit, they don't know what you were approved for, and they won't show any new accounts.


If you apply in bulk, you can get a much higher score as all of your accounts start to age past 6 months at the same time. 

Keep Your Credit Utilization Low

No matter what you do, always work on keeping this low and never let one of your credit cards have over a 60% individual utilization.


Along with trying to keep your entire credit profile under 30%, you should make sure you treat your individual accounts the same.


The lower your credit utilization, the higher your score will become.


And here's the best thing: 


Your credit utilization changes every 30 days, so while you might have seen a decrease in your score 30 days ago, this month, you could see an increase just by decreasing your credit utilization.

Only Pay A Collection If It Will Be Deleted

My number one rule is that you should not pay for a collection unless it is going to be deleted from your credit report. 


A pay for deletion request letter looks something like the letter on the right --->

You don't want to have it showing on your credit as Paid, you want it completely removed so that it doesn't tarnish your report or your reputation to a future lender.


This method is called Pay for Deletion, and you should ask for that (in writing) before you decide to pay any type of collection account.  

pay for deletion letter

This will save you a ton of headaches, and you will probably see your score increase once that item is completely removed from your report. 

Wait... Seriously... Just Wait

My last tip is that you need to wait.  


This is probably the oddest thing you can do to get a better credit score; however, it is the most crucial step. 


Most people want to see an instant change in their credit, and they want to be able to buy that car or get the home they dreamed of. 


Unfortunately, the one thing you have to do with credit is to wait. 

wait for your credit to increase

You should hold off for at least 1 year on buying anything if you need to re-build or grow your credit. 


This should be enough time to put a plan into action; let new accounts hit your credit and old ones and inquiries to fall off. 


It also helps you increase your average age of accounts, which can only increase with time. 


I know you didn't want to hear that, but it's the last and best piece of advice for increasing your credit score. 

CHAPTER 5:

What To Do If You Don't Have A Credit Score


If you don’t have a credit score, you are not alone.  As a matter of fact, there are over 45 million people in the United States who are considered credit invisible. 


But don’t worry.  There is a way to step into the light and become visible to the world of credit.  We address the different ways below. 

credit invisible

Start With A Credit Builder Loan

​If you don’t have a credit score, one of the fastest and most affordable ways to get one is with a credit builder loan through Self (previously known as Self Lender).

self home page

These credit builder loans through Self have a ton of benefits such as: 

  • No Credit Check
  • They report to all major credit reporting agencies
  • Very low start-up costs
  • Upgrade To A Secured Card At No Additional Cost

The way a credit builder loan works is that you choose the amount of loan you want to apply for (usually up to $500.00) and then how long you want to pay it off (within 1 or 2 years).

self lender loan amount

This is where things are a bit different; once you get approved for the loan and the pay off schedule, you will start making payments the next month.


Your loan will be held in a CD, and once you have paid the loan off, the funds will be returned to you.


Think of it as a savings account that helps you build your credit with payments as low as $25.00 per month.


Once you make enough on-time payments (that are reporting to the credit bureaus), you can qualify automatically for the Secured Card from Self.

self secured credit card, self visa


You won’t have to re-apply, all you will do is transfer some of the money from your loan to the new secured card.


This gives you two accounts in one, which is an excellent thing for starting with no credit score at all.


You should check out our review for Self.

Get A Merchandise Account

The next fastest ways to get one and start establishing your credit is with a merchandise account through Fingerhut.

fingerhut home page account

​You can get a merchandise account through Fingerhut regardless of your current credit situation. 

They also report your credit line to all three credit reporting agencies. 

Getting a merchandise account will give you a hard inquiry on your credit report, but that won’t be a big issue since you are in the process of establishing credit. 

With your initial credit limit, you should buy something you need from the over 400,000 items on Fingerhut.com and make on-time payments.

my credit journey Fingerhut Credit Card Account

After making payments for a few months, you will probably get a credit limit increase.

Don’t believe me?


Check out how our Co-founder Mark used Fingerhut to increase his score over 100 points. 


The only down-side to this account is that you can only use it to purchase items from Fingerhut.com.

Look Into Secured Credit Cards

Another excellent option to establish a credit score is to get a secured credit card like the Open Sky Secured Visa Credit Card. 

opensky home page

These cards function like any credit card except they were made for people who have little or no credit, and they will come with much higher interest rates. 


Now, there are several options for secured cards, and our favorite one is the Open Sky Secured Credit card because it offers:

  • No Credit Check
  • Easy to qualify
  • Credit building tool
  • Reports to all 3 major credit bureaus
  • No Bank Account Needed

Just like all secured cards, however, you will need to put up a security deposit of usually $200.00 to qualify for this card. 

Your initial deposit will be your credit limit, so this makes secured cards one of the more expensive options to start with. 

opensky secured credit card

But you do get to create your own credit line, and you can use the card anywhere that Visa is accepted. 


We did a detailed Open Sky Card review, check it out for more information.

Learn About Rent Reporting

Rent reporting is a pretty new concept. Still, it is establishing itself as a compelling way to develop a strong credit profile very fast.

Unlike the other options above, rent reporting takes your current rent payments and pushes them onto your credit reports.

how rent reporting works

This allows you to start building a credit history. 

Usually, you can see an update to your score within weeks or sometimes days of getting started. 

There is a massive benefit from this because you have the option also to report your past rental history. 

This automatically gets you an increase in your average age of accounts as well as the amount of on-time payments, which means an instant change in your credit score.

rock the score rent reporting

Several companies offer this type of service; however, our favorite is Rock The Score because they provide:

  • Rent reporting to Transunion & Equifax
  • Low Startup Costs
  • Option to Report Past Rent
  • Fast Reporting
  • Credit Building Tool

Experian has also got into this industry by introducing Experian Boost, it mostly does the same thing but only for your Experian credit report and it is Free.

Overall, rent reporting is another fantastic way of stepping out of being credit invisible. 

Once you decide on which option works best for you, give everything 30 days to cycle, and then you should check again for your credit score.

There are a ton of ways to get a free credit score and we actually wrote the ultimate guide on how to get a free credit score


BONUS CHAPTER:

What’s A Good Credit Score For Loans By Type?


Credit scores are used by lenders to help estimate the possibility of you not paying them back.


Lenders will use all the information that is available to calculate their risk, which will determine the interest rates you are offered.


With that in mind, to answer what is a good credit score for a particular loan type, we will address each individually.

credit scores for loans by type

What Is A Good Credit Score For An Auto Loan?

Auto loan rates by credit score are divided into five categories, with Super Prime being the highest and deep sub-prime the lowest. 


Auto loans are considered secured loans because you use the actual vehicle as collateral for the loan.

Score Category

Score Range

Super Prime

780-850 

Prime

 660-779 

Non-Prime

 600-659 

Sub-Prime

 500-599 

Deep Sub-Prime

 300-499 

This allows lenders to offer financing to people with credit scores that wouldn’t otherwise qualify for an unsecured loan based on their FICO score.


While Super Prime and Prime credit scores will be good for the best auto loan rates by credit score, the premium charge for Non-Prime and Sub-Prime auto loan rates surprisingly isn’t that bad.


Once your credit score starts nearing 500 and below, your auto loan options will significantly decrease with a deep sub-prime credit score.


But this doesn’t mean that all is lost because many independent dealerships will offer in-house financing, and we even have a few lenders that may still give you car financing.


The APR rates charged for a car loan with a deep sub-prime score are cripplingly high, and we discuss many alternative options in our articles on how to get an auto loan with a deep sub-prime credit score.


There are many excellent auto loan lender options that you can spend hundreds of hours reviewing… Or piggyback on our research and save yourself some time by reading our article on the Best Auto Loan Companies of 2019.

What Is A Good Credit Score For A Personal Loan?

Personal loans are broken into four credit score categories, and to keep things confusing, they usually refer to them as excellent, good, fair, or bad/poor. 


Personal loans are the Swiss army knife of loans.

Score Category

Score Range

Excellent 

760-850

Good 

690-759

Fair 

580-689

Bad 

300-579

They can be used for a variety of reasons:

  • ​Debt Consolidation
  • Payoff Credit Cards
  • Home Improvement 
  • Emergency Cash
  • Medical Bills
  • Education
  • Business Start-up
  • You name it!

Most personal loans are unsecured by any collateral and have lower interest rates than credit cards.


Many people will look to a personal loan to consolidate their credit card debts at a much lower rate than their credit cards APR to save thousands of dollars.


Personal loans can range from $1,000 to $100,000 with payment terms as short as six months and as long as seven years.


People with an excellent and good credit score will receive the best rates because they are at a lower risk of not paying back the lender.


As your credit score become fair and lower, the number of lenders willing to risk giving an unsecured personal loan dwindles fast.


Even with a bad credit score, there are still some personal loan options, albeit, at interest rates between 35% and 155%.


While these are personal loans, they are usually also marketed as ‘installment loans,’ which is basically a payday loan that has longer payment terms between 6 months to 7 years.


Caution! A personal loan with an APR rate of 100% will double in value each year if you have to take out a bad credit loan, take the smallest amount out possible for the shortest length of time.


Check out our review of the best personal loan companies of 2019.

Your Turn To Take Action

Now that you know what a good credit score is and how to get one it's your turn to take action.


You know the exact steps it will take to stop being credit invisible and to become someone with an active credit file.


You have a ton of options so don't waste any time, the sooner you take action on your credit the better your overall financial life will be. 


So: 


Do you have any stories about being credit invisible or becoming active in building credit?


Let us know by leaving a comment below right now.


sa_el_co_founder

By Sa El

Sa El is a Co-Founder of Credit Knocks where he writes about credit education. He is also a Licensed Insurance Agent with over 11 years of experience and a licensed Real Estate Agent.