Banking and Finance

What Is A Good Credit Score?

Elizabeth
July 27, 2021

What Is A Good Credit Score?

We’ve got some good news! The average credit score is on the rise. Reports at the beginning of 2022 show that the average FICO Score is 716. That’s not only a new all-time high but it’s a total of five points higher than it was in 2020.


However, understanding the average credit score isn’t the only way to gauge how you compare to others in the country. Really, all that matters is that you have a good credit score so that you can access products and financial services at great rates. So, what exactly is a good credit score? It varies slightly from credit model to credit model.


Keep reading as we help you understand what a good credit score is and what affects your credit score so that you can increase it if yours is less than “good.”

How is a Credit Score Calculated?

Okay, let’s start by talking about how a credit score is calculated. There are several credit bureaus that collect information about you. Thos include Equifax, TransUnion and Experian. 


Each credit bureau has its own algorithm to determine your credit score (although FICO is the most widely used, VantageScore is widely used as well). However, each algorithm is pretty similar, taking into account different aspects of your financial life, such as how long you have had certain accounts open, whether or not you make on-time payments, and how much debt you still owe across all of your accounts.


Why do they look at all of these factors? Basically, they’re trying to assess your creditworthiness and how much of a risk you are in lending you more money. They use a few factors to gauge that and that’s what helps them generate your score.

What Affects Your Credit Score

Above, we mentioned on-time payments, how much debt you owe, and more. Those are some of the principal determining factors in what affects your credit score. Let’s break it down below:


  • Payment History: The biggest factor that affects your credit score is your payment history. Really, they wanna see that, when you take out credit, you pay it back on time. More than one or two missed payments can really hurt your score quite a bit.
  • Amount Owed: On top of that, potential lenders want to see that you don’t have an extremely high amount of debt owed. If you owe $20,000 already, it’s not likely that they’ll approve you for more money, whether that’s via a loan or credit card.
  • Length of Credit History: How long have you had credit accounts open? The longer you have, the better!
  • Credit Mix: On top of all of the above, your credit score is calculated factoring in your credit mix. It’s preferable if you have a mix of different credit types, such as student loans, credit cards, and an auto loan.

Is 700 a Good Credit Score?

Now that you know what affects your credit score, it’s time to answer the question at hand: what is a good credit score? The answer: it depends which credit scoring model you’re looking at. Below, let’s look at FICO’s credit score ranges:


Poor: 300-579

Fair: 580-669

Good: 670-739

Very Good: 740-799

Excellent: 800-850


As you can see, with the average credit score being 716, most people in the country have a “good” credit score. Now, let’s take a look at the VantageScore scoring model:


Very Poor: 300-499

Poor: 500-600

Fair: 601-660

Good: 661-780

Excellent: 781-850


So, what is a bad credit score? Generally, anything below 600. With the FICO scoring model, you can have a credit score as low as 580 and still have it be considered a “fair” credit score. However, your aim should be to have a credit score that’s at least considered “good” or on par with the nation’s average score.


Now, it is important to mention that your credit score will need to be “good” for various different things. For example, what is a good credit score to buy a house? Usually, you’ll need a credit score of 620 or higher to get a good interest rate on a conventional mortgage loan. 


What about a good credit score to buy a car? What’s that? As Jerry notes, “You may be able to get a car loan with a 650 credit score, but you might not like the terms and conditions of the loan if you do.”

Average Credit Score by Age

It’s no secret that younger individuals often have lower credit scores. In fact, Americans over the ages of 75 have the highest credit scores in the country. Their average score is 758. And, the average credit score by age decreases from there by generation.


Baby Boomers (which are now roughly between the ages of 56-74), have an average credit score of 736. Generation Y follow Baby Boomers with an average score of 698. And, Millennials are next in line with average scores of 679. 


Why does it go down the younger you get? For a lot of reasons! Mostly, you simply haven’t had as much time to generate a long history of on-time payments, and you also haven’t had much time to increase your length of credit history (which, as we’ve just learned, is one of the factors that affects your score!).

Build Your Credit with Cheese

What is a good credit score? About 715, on average. However, you really shouldn’t use that as your reference point. Instead, focus on paying your bills on time, increasing your length of credit history, and keeping your credit utilization rate low. As long as you focus on those determining factors, you’ll see your credit score increase over time.


In the meantime, monitor and build your credit score with Cheese! We’re introducing a new credit builder feature within the Cheese app that will help you track your purchases and monitor your score so that you can adjust your spending habits and build your credit.


Join the waitlist to be one of the first users to enjoy the feature.