What’s a good credit score? It depends on the lender and credit-scoring model

According to a recent J.D. Power Banking and Payments Intelligence Report, close to one in five consumers aren’t clear about how credit scores are calculated. But learning about your credit score is important and can make a big difference in your financial life.  

Ahead, we explain what is your credit score, the definition of a “good” credit score, and steps you can take to increase your score. 

How credit scores work   

Your credit score is represented by a three-digit number range from 300 to 850. Just like in school, the higher the number reflects a better score. This number is used by companies, like banks or lenders, to determine how likely you’ll be to pay back a loan. For consumers, a credit score is a good tool to understand your financial health. 

“A good credit score opens doors for more than just opening a line of credit or getting a loan,” says Jennifer White, senior director, banking and payments intelligence at J.D. Power, which offers consumer insights and advisory services. “A good credit score can also lead to offers for credit cards with zero interest [balance] transfers, which allow you to move existing debt to a card that will cost you less in the long run.”   

As a consumer, it’s important to be aware that there’s no one single credit score—there are a lot of variations. But the two most prominent credit scoring systems are FICO and VantageScore.   

What is a good FICO credit score?   

According to MyFICO.com, a good FICO credit score is one that’s between 670 to 739. Scores higher than that—between 740 to 799—are considered “very good,” and 800 and above are “exceptional.”   

A “fair” credit score falls between 580 to 669 and a “poor” credit score is anything below 580.  

In 1989, the Fair Isaac Corporation launched the FICO credit score, which is now one of the leading credit scoring models. FICO scores offer lenders insight into your credit history.    

There are multiple factors that contribute to your FICO credit score, but some have more weight than others. Here’s how FICO scores are calculated:  

What is a good VantageScore?   

VantageScore is another leading credit score model used by many financial institutions and lenders.  

VantageScore 3.0 and 4.0 follow the 300 to 850 range, but previous iterations had a range of 501 to 990. According to the VantageScore website, a good VantageScore is called “prime” and in the range of 661 to 780. Scores in the range of 781 to 850 are considered “superprime.”   

VantageScore credit scores between 601 to 660 are “near prime” and those with a range of 300 to 600 are referred to as “subprime.”   

The VantageScore 4.0 model is fairly similar to the FICO model and is calculated with the following weights and factors:  

Additionally, VantageScore labels certain factors as degrees of “influential.” Here’s a breakdown of what those are:  

• Extremely influential = total credit usage, balance, and available credit   
• Highly influential = credit mix and experience  
• Moderately influential = payment history  
• Less influential = age of credit history   
• Less influential = new accounts opened   

VantageScore has some nuances when compared to FICO and uses different descriptions, but the ranges and impact on credit score are similar.   

How to get a good credit score   

FICO and VantageScore both vary a bit in how they define a “good” or “prime” score, and to make things even more complicated, different financial institutions might have their own standards.  

“A good credit score depends a lot on the financial institution that is lending the money,” says Chris Fred, head of U.S. credit cards and unsecured lending at TD Bank. “They all have their unique ways of evaluating creditworthiness and the credit health of customers based on a variety of factors, not just the score.”  

Rather than stress about a very specific number, it’s best to just focus on keeping your accounts in good financial standing and working toward the highest score you can. If you want to improve your credit score, there are a number of actionable steps you can take to move the needle forward.   

Here are 10 steps to get you started: 

1. Pay bills, debt, and other monthly payments on time, consistently. Set up autopay or sign up for reminders if you tend to forget. Debt relief companies can offer assistance in reducing debt.

2. Get on a budget. Setting up a household budget is a great way to ensure you can pay more than the monthly minimum payment if you have credit card debt. Ideally, pay off your balances in full each month.   

3. Keep a low credit utilization ratio. Your credit utilization ratio is the number you get when you divide your balances by your credit limits. Experts recommend keeping this to 30% or less. 

4. Pay ahead of the statement due date. Your credit utilization is reported to the credit bureaus close to your statement due date. If your utilization is high, consider paying down or paying off your balance before the statement date.   

5. Ask your credit card issuer for a credit limit increase. Getting a boost in credit limit and keeping balances on the low end can positively impact your credit utilization ratio. But you should only do this if you won’t be tempted to spend beyond your means. 

6. Avoid applying for lots of new credit within a short timeframe. When you apply for any type of credit, a hard inquiry will follow. A hard inquiry is when a company pulls your credit report to review as part of a formal application for credit. This may lead to a temporary decrease in score. If you apply for too many credit cards, it can be a sign to lenders that you’re living beyond your means.   

7. Be careful about closing accounts. When you pay off a loan or close a credit card, it can lower your credit score temporarily as it impacts your length of credit history. This can be just a temporary ding, but you usually don't want to close your oldest account. 

8. Become an authorized user on someone else’s account. If you have no credit history, it’s possible you can be an authorized user on a family member or spouse’s credit card. If they’re responsible with credit, it can help you increase your credit. Be aware that payment is still the responsibility of the other party, so if you overspend and don’t pay the bill on time, you risk hurting their score as well   

9. Start with a secured credit card. Are you credit invisible with no score or have poor credit? You can start your credit journey with a secured card. You secure the card via a deposit that serves as your credit limit. “If you want to improve your credit score, a secured card is also a very useful tactic for many consumers who wouldn't qualify for an unsecured card,” says Fred.  

10. Routinely review your credit report for errors. There could be a mistake on your credit report that’s hurting your score. “Credit reports have errors,” says Carlos Medina, senior vice president of operations and business development for One Technologies, the provider of ScoreSense. “It's also important that you're staying vigilant concerning your credit and any fraud going on.” Access your credit report at no cost at AnnualCreditReport.com. You can also hire a reputable credit repair company to assist in disputing errors on your behalf.

If your credit score has room for improvement, taking these steps can help. Start by obtaining your credit score from a trusted source.   

“For many consumers, your score is offered for free online through not only the three large credit bureaus, but also often by your bank or your credit card company,” says White. "At some of those banks and credit card companies, your credit score will appear immediately when you login to their mobile app or online tools.”  

Knowing where you’re at is the first step. Taking appropriate action and monitoring your credit score are the next steps. It may take some time, but consistency will work in your favor and can help your finances more than you realize.