There are ways to improve it
An excellent credit score is like the top math score on the SAT. With both, 800 is exceptional.
But if your credit score isn’t near that number, you should know what constitutes a good credit score that will let you qualify for a loan at a decent interest rate.
The answer: It should be at least in the mid to high 600s.
If your score isn’t that high yet, you’ll need to exercise good borrowing behavior, take some strategic steps, and have patience. You may also want to take advantage of two new programs offered by credit industry companies that are designed to improve those numbers (more on these programs below).
The FICO score is the brand of credit score used by most consumer lenders, so it’s the one to pay the most attention to. FICO credit scores typically range from a low of 300 to a high of 850. (A few custom FICO scores for auto loans or bank cards go from 250 to 900, says Can Arkali, principal scientist in analytics and scores development at FICO.)
When you get a credit score report from your lender, your number is often depicted on a continuum like a spectrum or rainbow, with bright green denoting the 800 range and red representing—well, you know.
FICO says there’s no “cutoff” where, say, a good credit score becomes a very good credit score, or a very good credit score becomes exceptional. But Experian, one of three major credit bureaus that supply data used in the FICO score, lays out the boundaries this way:
- 800-plus: Exceptional. Only 1 percent of borrowers in this range are likely to become seriously delinquent. You’ll get approved easily for the lowest rates.
- 740-799: Very good. Two percent of borrowers in this category are likely to become seriously delinquent. You could get better rates from lenders, but it’s not a given.
- 670-739: Good. Eight percent could become seriously delinquent. This stratum is where most Americans sit. You’re an “acceptable” risk.
- 580-669: Fair. An estimated 27 percent in this group could become delinquent. You’re a candidate for subprime loans at higher rates.
- 579 and below: Poor. FICO doesn’t trust this group at all; it estimates that 61 percent could become seriously delinquent. If you can get credit at all, you’ll probably have to put down collateral or a deposit. You also may have to pay a fee that borrowers with higher scores don’t pay.
Staying Out of Subprime
Bruce McClary, vice president of communications at the National Foundation for Credit Counseling, says that a subprime FICO score—at which a borrower is offered no credit or very expensive credit—is similar to Experian’s range, with “good” starting at 660 or 670.
“Certainly if someone’s score dips below 600 on the FICO scale, that’s a critical situation,” says McClary. “Many lenders won’t lend to you, and those who will are going to offer you credit at the highest possible cost or interest rate.”
With a FICO score of under 600, you might be able to get a credit card or subprime bank loan—called a signature loan—but it could charge up to 36 percent interest, the highest allowable by law, McClary says.
Katie Ross, education and development manager for the Boston-based American Consumer Credit Counseling, a nonprofit that offers guidance to consumers nationwide on budgeting, credit, debt, and related issues, plants the boundary between fair and good at 600. “What matters most is that you manage your credit so that it’s above the fair credit score range,” she says.
You’re Not Labeled for Life
There’s lots you can do to make sure you have a good credit score. Most important, make your credit card and loan payments on time. Thirty-five percent of the FICO score is based on your payment history. Check our other tips.
Those with thin or subprime credit histories might consider signing up for one or both of the new credit improvement programs, Experian Boost and the Fair Isaac Corporation’s UltraFICO. Boost, which launched in March, includes utility payments in the score calculation, and UltraFICO, expected to roll out nationally later this year, reviews banking history. For more information, check these new ways to improve your credit score.
Keep in mind that a major downturn in your luck or behavior could drop your credit score by 100 points, but it’s unlikely to dip it into the 300 range.
Indeed, McClary says he’s never actually seen a 300 FICO score—or an 850 score, for that matter. The lowest score he’s ever seen was 425, he says, and in that case the holder had already been in bankruptcy and was delinquent with several creditors.
“Obsessing over perfecting your score might be a waste of time,” Ross says. “Your efforts should be more focused on maintaining your score within a healthy range.”