What credit score is considered good or bad? (And why does it matter so much?)

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Your credit score is an essential part of your financial picture, with a huge impact on how much you pay for loans and other accounts. In fact, credit score impacts many aspects of your finances, including your credit cards, mortgage, auto loans, student loans, insurance, utilities, and even can possibly help you get (or lose) your dream job.

And yet too many people don’t pay enough attention to their credit score, or even know what it is at the moment. But that’s not everyone, as the majority of Americans understand how important their credit score is and are actively working to improve it on a regular basis.

In fact, the national average for credit scores as of 2021 is 711 for FICO scores. Not only is that an all-time high but it’s 5 points higher than just last year!

With most credit scoring models ranging from 300 to 850, it’s important to understand when a bank, lender, or creditor will consider you a good credit risk, a bad credit risk, and what’s the impact to both.

So, what’s considered a bad credit score?
By most measures, a credit score that’s considered “bad” or “poor” is 630 or below. From about 640 and up your credit is treated as “fair.”

With FICO Score 8, which ranges from 300 to 850, a score of 580 or below is treated as bad, with 580 to 669 considered fair.

And Vantage Score, which ranges from 300 to 850 as well, judges your credit as bad or poor if it’s below 500 to 600, with scores of 300 to 499 branded as very poor – or virtually un-lendable.

No matter which credit scoring model rates your credit as bad, you’ll want to make to avoid falling into that category because you’ll only be eligible for subprime loans – if any bank or lender will even touch you.

Subprime loans come with some serious strings attached, like usurious interest rates, fewer loan options, shockingly bad terms, and higher down payment requirements.

So, whether your credit score is 350, 550, or 630, understand that it’s considered bad by banks, lenders, and credit bureaus, and your options with loans and credit will suffer accordingly!

And what do we consider good credit?
With all of that talk of gloomy, bottom-dwelling credit scores behind us, let’s talk about what’s considered a good score.

With conventional scoring models that range from 300 to 850, including FICO, good credit is usually above 690. Below 690 is only fair, and once your credit score hits 720 or 730 and higher, it’s considered excellent. So, you’ll notice that the good credit bracket is relatively small.

With VantageScore (also ranging from 300 to 850), a credit score of 661 and higher is considered good, and 660 or below is only fair.

We documented the detriments of bad credit, so it would be only fair to outline the benefits of good credit. If your score is 690 (or 661 with Vantage) and higher, you’ll instantly be considered a good credit risk for banks and lenders, and you’ll be offered at least average interest rates, terms, loan options, and down payment requirements.

While a good credit score is adequate to access plenty of credit cards, mortgages, auto loans, or installment loans, it doesn’t mean that they are optimal for consumers. Instead, one should always strive for excellent credit – about 720 and above by most standards.

Once you hit the excellent credit mark, the world is yours when it comes to taking out loans or opening up new accounts, with the absolute best rates and terms available as banks and lenders compete for YOUR business since they consider you a very low risk.

As I mentioned, the difference between a good credit score and an excellent score is just a small bump, so it’s well worth it to improve your score to that 720 and above mark.

How can you take the leap from bad or good to excellent credit?

What goes into your score?

By understanding what factors make up your credit score, you can do the right things to improve it.

Each credit score is factored according to:

1. Payment History 35%
35 percent of your credit score is made up by your payment history, including your track record for paying on time with all credit cards, installment loans, mortgages, and more.
2. Debt Ratio 30%
Your debt ratio makes up 30 percent of your credit score, which is also known as credit utilization. Simply put, that’s the ratio of your current debt to the amount of available credit. To optimize your score, we recommend keeping balances below 30 percent of the credit limit, or even 10% ideally.
3. Length of Credit 15%
15 percent of your credit score is based on the length of your credit accounts, as the credit scoring algorithms highly value older, mature accounts in good standing over newer accounts.
4. Credit Mix 10%
The types of accounts you have listed on your credit report make up 10 percent of your credit score, as a healthy mix of revolving, installment and mortgage is encouraged.
5. Credit Inquiries 10%
10 percent of your credit score are inquiries, when banks, lenders, or retailers access your credit report for the purposes of extending new/more debt.

Blue Water Credit is ready to help you!
As the national leader in responsible, ethical credit repair, Blue Water Credit can help you review your credit report, so we’ll know what red flags are on your credit and holding you back. From there, Blue Water Credit can get to work to fix your report and boost your score from poor or fair to good or even excellent.


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