A FICO score is a sort of credit score that is used by lenders to determine your ability to pay back the loan money when you are applying for a loan or credit card. FICO score is a credit score that ranges from 300 to 850 – the closer to 850 the better. But what is considered a ‘good’ FICO score? Here's a breakdown of different credit score ranges and what they mean: Here's a breakdown of different credit score ranges and what they mean:
800–850: Outstanding On the other hand, the lenders regard the creditworthiness as outstanding if the FICO score falls between 800 and 850. This will enable you to get loan and credit card payback terms as well as feasible as well as the best interest rates. Less than 1% of customers fall under this area for credit score.
740–799: rather good Lenders still find scores between 740 and 799 to be rather excellent. Should you fall within this category, you will be quickly authorized for any card or loan you want at a great interest rate. Of customers, this credit score range roughly accounts for 15 percent.
Good FICO scores range from 670 to 739; they are regarded as decent credit ratings. Actually, with scores in this range, you will be qualified for most loans and credit cards at a fair interest rate as this group makes up around thirty percent of customers. It will not ensure, however, that you get the best terms or the lowest rate available.
580–669: Just Fair credit ranges go from 580 to 669. Based on the statistics, around 25% of all customers fall into the fair category of credit score. To earn fair credit, nevertheless, you may apply for credit cards and loans via regular banks—probably at extremely high rates or fees. Large loans for major expenditures like vehicles could not be granted to you.
300–579: Extremely Bad/Very Poor Credit FICO scores below 580 are considered to be either very poor or terrible credit ratings. This makes up around thirty percent of customers. But within this range, the lower your credit score the more difficult it will be to get credit facilities such as credit cards and loans. Although some lenders would be ready to finance your application, the fees paid and the interest rates are generally enormous. Should the score go into the negative credit zone, it should be rebuilt before debt accumulation results.
Several consumer sources agree that a credit score of 680 or above is considered good or excellent. Thus credit scores below 669 are considered fair or average, yet most financial specialists advise striving for good to exceptional credit scores for the maximum financial advantages. This often translates to targeting a FICO score of at least 670 or above. However, the nearer you get to 800, the more favorable your position will be when it comes to credit applications.
Here is a quick overview of minimum FICO scores often recommended for different credit products:
- Mortgages – Many companies require at least a 620 FICO score to qualify for conventional mortgages with decent interest rates, 740+ to get the best rates.
- Auto Loans – A good auto loan rate benchmark is around 660 FICO and the best auto loan rates would require a FICO score above 740.
- Credit Cards – Basic credit cards can be obtained with scores in the fair category but for a good rewards program and reasonable interest rate, you need at least 670 for premium travel rewards cards. Good cards usually call for 740+ scores.
- The Advantages of Good Credit But why does it matter to continue to work at increasing your credit even after you have reached a ‘good’ level? There are a few key advantages that make getting into that very top tier worthwhile: There are a few key advantages that make getting into that very top tier:
- Low Interest Charges – Good FICO scores get you the best possible interest rates on home loans, car loans, personal loans, and credit cards. This can greatly reduce your interest costs throughout the loan as compared to a fixed interest rate.
- More Money - Excellent credit scores enable you to secure jumbo loans over the set conforming loan limit and qualify for the highest possible credit line on a new credit card.
- More Bargaining Power – Lenders’ bidding war is usually high when you have a good credit record. This means that it is possible to bargain for additional benefits and privileges.
- Security Deposit Waivers – Those who have achieved high scores in credit checks may not be required to make security deposits for services such as cellular services and utilities.
Increased Approval Rates – You can get rejected for loans and credit regardless of your financial responsibility and good credit rating occasionally; notwithstanding, once your credit score is in the 800+ range, it is considered exceptional, and your chances improve sharply.
So How Do You Get to That Excellent FICO Score?
- If you don’t have exceptional credit yet, here are some tips for improving your score:
- Maintain a good payment record on all accounts – Late payments hurt credit scores. Pay on time to avoid late fees on credit cards, loans, or utility bills by enrolling in the autopay system.
- Limit credit card usage – Credit card balances are a major factor that can sink a credit score, so try to reduce the balances as much as possible every month. More experienced practitioners suggest keeping the utilization rate below 30 percent.
- Do not apply for new credit – Every time you apply for credit, it pulls a record on your credit report and each record reduces your score by a few points initially. Use it sparingly, only for the credit that is required.
- Use the credit report from all three bureaus - Be vigilant and check your credit reports from Equifax, Experian, and TransUnion because you can report any errors or suspicious activity.
- Credit-builder products - Secured cards, credit-builder loans, and secured credit cards will help you start building your credit history or repair it.
The Bottom Line It is important to strive to get your credit as high as possible in the good to excellent FICO range. However, if your goal is to get approved for reasonable loan terms at low interest rates coming from conventional financial institutions, you should aim for a minimum credit score of about 670. The best credit score in the 800s will enable you to get the best lending deals and approval rates in the market. Check your FICO score at least once a month and keep on practicing credit-rebuilding techniques until you are in the exceptional FICO score group.
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