Credit scoring models analyze your credit report(s) and generate credit score(s) using the information in your report. A higher credit score is always preferred, but there are no definite guidelines that establish a “good” or “bad” credit score. Every business sets its own internal credit standards when determining lending rates or other credit-based decisions.
With that said, one way to evaluate your credit score is in relation to other consumers. The companies that generate your credit score release annual statistics that show the relative likelihood of achieving any particular credit score. Before comparing your score to other consumers, you should check your credit score for free so that you can evaluate any score changes over time.
What is a Good Credit Score Range?
FICO is the credit scoring model used in roughly 90% of lending decisions, with VantageScore being used less than 10% of the time. Although they use slightly different scoring algorithms, both companies produce a credit score range of 300 to 850.
Here is a breakdown of both credit scoring models using the latest 2017 data:
|Credit Score Range||FICO |
(% of people within range)
(% of people within range)
|300 - 499||4.7%||4.4%|
|500 - 549||6.8%||11%|
|550 - 599||8.5%||10.6%|
|600 - 649||10%||9.6%|
|650 - 699||13.2%||17.9%|
|700 - 749||17.1%||12.4%|
|750 - 799||19.0%||14.7%|
|800 - 850||20.7%||15.3%|
The average FICO credit score (in 2017) is roughly 700. The VantageScore model is actually more stringent than the FICO model, with the average VantageScore being roughly 675.
One way to define a “good” credit score is to compare your score to the average score. If your FICO score exceeds 700, you are slightly ahead of the average American.
But I would recommend that you think about credit scores more practically. In other words, what benefit does your credit score offer, and would your life improve if your credit score changed?
Although there are no exact guidelines that define bad, average, good, or excellent credit, I’ve developed a system that organizes each score into functional categories:
Bad credit: Below 625
Generally, a credit score of 625 or lower is considered bad credit. Bad credit is usually caused by negative remarks on your credit report, including late and/or missed payments, overextended credit card utilization, or even bankruptcy. Occasionally, individuals with very limited credit history will begin their journey in the low-600s.
If you have bad credit, many lenders will reject your loan and credit card applications because they deem you too risky. If you are approved, you will be forced to pay ridiculous interest rates and fees. You will also likely be forced to pay more for insurance coverage, as most insurers now view your credit as a risk factor when determining your monthly premiums.
Average Credit: 625-675
A credit score in the middle-600’s is considered average credit. If you ever have a late payment, excessive credit utilization, or a limited credit history, you might find yourself with average credit.
Individuals with average credit are more likely to be approved for loans and credit cards than those with bad credit, but the interest rates and fees will still be unfavorable.
Good Credit: 675-750
As your credit score approaches 700, good things happen. There is a high probability that you will be approved for all loans and credit cards. Your insurance premiums will become more competitive, and very few utility providers will require an upfront deposit when establishing your account.
You won’t qualify for the best possible interest rates until your credit score approaches the mid-700’s, but you will be approved for most credit-related products and services.
Excellent Credit: 750-850
Excellent credit will qualify you for the lowest interest rate on every possible loan and credit card. You’ve officially arrived, and you should take advantage of every potential credit-related benefit.
Building your credit score above 750 will bolster your bragging rights, but little else. Very few creditors reward a credit score above 750 (or possibly 760, according to FICO in the section below).
Good Credit Can Save You Money
To illustrate the system above, we can use FICO’s calculator to demonstrate the relationship between credit scores and 30-year mortgage interest rates ($200,000 starting loan balance):
|FICO Score||APR||Monthly |
|Total Interest |
First, notice that FICO ignores all credit scores below 620 in this comparison. Most mortgage lenders will reject applicants that score below the “bad credit” threshold.
The Credit Penalty column is the difference in total interest paid between the comparison group and the excellent credit (760+) group. In other words, it’s the additional interest that you will pay for not maintaining an excellent credit score.
This table illustrates why credit scores are so important. Very few people can purchase a home with cash, which means that most will obtain a mortgage. Your credit score can save (or cost) you thousands of dollars over the life of the loan.
The relationship between credit and interest applies to every other type of loan, including auto loans, personal loans, and business loans. In addition, your credit score is used to determine insurance pricing, utility deposits, and even potential employment opportunities.