What is a Good Credit Score?

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  • Written By: Eric Tallberg
  • Edited By: Jay Garcia
  • Last Modified Date: 23 October 2019
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A good credit score is vital in securing any sort of favorable credit or loan terms. Credit scores are a reflection of financial dealings with lenders and/or creditors; a good credit score, therefore, will not only assure considerable savings on interest rates, it will also expedite the loan or credit approval process. Poor credit, on the other hand, will often result in the payment of higher rates for lesser credit or loan amounts and, very often, the outright denial of credit or a loan.


The primary credit scoring repository is the Fair Issac Corporation (FICO®), which developed the most widely used credit rating system. FICO® gathers and assesses credit and loan information from the three largest credit bureaus, Experion, TransUnion and Equifax, and disseminates this information to banks, lenders and credit card companies. FICO® also provides credit scores to individual consumers who wish to keep track of their credit information either as a regular financial maintenance tool or for purposes of determining if they have a good credit score when applying for credit or a loan. A FICO credit score will range from a low of 300 to a high of 850. The lower number will indicate very poor credit and a higher risk to lenders and creditors, while the higher number represents essentially perfect credit. Credit scores above 600 are generally considered worthy of reasonably favorable credit terms. A score above 720 is considered a good credit score, while a credit rating of 600 or below is considered poor.

FICO® scoring assessments are based upon five basic criteria. (1) Payment history accounts for 35% of the total score. (2) The amount of money owed counts as 30%. (3) The length of credit history counts as 15% of the total. (4) New credit (10%) and (5) the types of credit used (10%) complete the total credit score.

Lenders are constantly assessing credit scores in deciding on a change in interest rates or credit card limits for specific clients, or to offer favorable rates to a prospective client with a good credit score. Potential borrowers can raise a poor credit score through the opening of a credit history and the timely re-payment of debt. Conversely, borrowers may lower a good credit score if they miss scheduled payments or default on a loan. A good credit score might also determine more favorable insurance premiums for such items as automobile and homeowners insurance.


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