What Is Considered a Good Credit Score?
Here's what it means to have good credit, what it can do for you, and how to take your score to the next level.
Here's what it means to have good credit, what it can do for you, and how to take your score to the next level.
There is no formal definition of a good credit score. It varies depending on what you're applying to borrow for, but it's generally accepted to be in the range of 670 to 739 in the FICO scoring model. Here's how the FICO score works, what is considered a good credit score, and how to increase your credit score from good to great.
How the FICO credit scoring model works
First of all, when I use the term "credit score," I'm referring to the FICO score. There are other scoring models out there, but FICO is the model lenders most commonly use, by far.
The formula that determines your FICO score is a well-guarded secret, but we do know that the FICO score is made up of five categories of information:
- Payment history (35% of score): Do you pay your bills on time, every month?
- Amounts owed (30%): How much do you owe on your credit accounts, particularly relative to your credit limits or original loan balances?
- Length of credit history (15%): This considers various time-related factors, such as the age of your individual accounts, the age of your oldest account, and the average age of all of your accounts.
- New credit (10%): Newly opened credit accounts, as well as your recent applications for credit, are included in this category.
- Credit mix (10%): Lenders want to see that you can be responsible with different types of credit, so having several different types of accounts (credit card, mortgage, auto loan, and so on) can boost your score.
FICO scores range from 300-850, with higher scores being better, and most consumers have FICO scores in the 500-800 range.
Many credit card issuers give a free credit score to customers. These days, many offer the FICO score, but not all of them do. If your credit card company gives you a credit score that's not based on the FICO model, it's still probably a solid indicator of how you're doing, but the scoring model and range may be a little different from those discussed here.
What is considered a "good" FICO credit score?
To be clear, there is no set number that is defined as the cutoff between a "bad" and "good" FICO score. And in practice, a good score depends on what you're buying. For example, if you're getting an FHA home loan, any score above 580 will get you approved. However, a score in the upper 700s can be required for the best credit cards.
The average American consumer has a FICO score of 700, so that's a good reference point to determine how you're doing relative to others. Additionally, FICO offers these guidelines to help you interpret your own credit score:
| Exceptional | 800 or higher |
| Very Good | 740-799 |
| Good | 670-739 |
| Fair | 580-669 |
| Poor | Under 580 |
Data source: www.myFICO.com.
What can you do with good credit?
If your score is in the "good" range in the chart, you'll generally be able to qualify for a mortgage loan with a competitive interest rate. The best rates are reserved for top-tier buyers, but the difference in interest rates between good and excellent credit scores may be less than you think. As of this writing, here are the mortgage rates consumers with various levels of credit scores can expect, and the difference they can make to your mortgage payment:
| 760-850 | 3.831% | $935 | $136,761 |
| 700-759 | 4.053% | $961 | $145,943 |
| 680-699 | 4.23% | $982 | $153,354 |
| 660-679 | 4.444% | $1,007 | $162,422 |
| 640-659 | 4.874% | $1,058 | $180,986 |
| 620-639 | 5.42% | $1,126 | $205,202 |
Data source: www.myFICO.com.
The same can be said for auto loans. As long as your income is enough to justify the loan, a good credit score will generally get you approved for a car loan, new or used. Your interest rate won't be quite as good as an excellent-credit borrower would get, and your dealer may require more money down, but approval is generally not a problem with good credit.
As far as credit cards go, there are some credit card products specifically designed for individuals with fantastic credit scores, and these may or may not be beyond your reach if you have a good credit score. Fortunately, there are some excellent credit card products available to people with good credit scores, and you can check out our favorites here.
How to increase your credit score from good to great
There is no way to build great credit quickly. I always tell friends that it's possible to go from no credit to good credit in a fairly short period, but that building excellent credit takes time.
Furthermore, there is no magic formula to getting a top-notch credit score. You can read my thorough discussion of the habits of people with great credit, but the general rules are:
- Pay your bills on time, every month, without fail. Over time, this step alone can boost your credit score into the next level.
- Keep a low (but not zero) balance on your revolving credit accounts relative to your available credit. The average person with a FICO score over 800 uses 4% of his or her revolving credit limits.
- Don't open new credit account too often, and let your open accounts age. The average in the "800+ club" opened their oldest account 25 years ago.
- Use several different kinds of credit, which will help maximize the "credit mix" category.
The best path to a fantastic credit score is smart credit behavior over a period of several years, and the behaviors needed to get there aren't much more than financial self-discipline and good old-fashioned common sense.
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By: Steven Porrello | Updated - First published on Nov. 24, 2023
Chase is the largest bank in the U.S., and one of the largest in the world. It has over 4,700 brick-and-mortar locations, more than 15,000 ATMs, and around a couple trillion in bank deposits. But for all this banking power, there's one thing Chase doesn't have: a savings account that can compete in today's high-rate environment. Seems as if a big bank like Chase would have at least one savings account that earned high interest, right? Truth is, banks lose money when they pay high interest rates and will forgo offering them if they don't need to attract customers. As the largest bank in the U.S., Chase is doing just fine and doesn't need high rates to bring in more deposits. But that leaves Chase clients in a bit of a conundrum. Just how much money are you missing out by keeping it in a savings account at Chase? Well, when you start to crunch the numbers, it can be a lot. The average American is probably missing out on $400 per year Today's most competitive rates on savings accounts are sitting at a two-decade high of about 5.25%. Most of these savings accounts are through the company Raisin, which is essentially a marketplace for finding high-yield savings and CDs. Last I checked, the highest rate on Raisin was 5.30% on a Customers Bank High-Yield Savings Account, followed by both VyStar Credit Union and DR Bank at 5.29%. How much could you make on 5.30%? According to a recent survey of U.S. Family Finances by the Federal Reserve, the median savings in 2022 was about $8,000. If you saved $8,000 in the Customers Bank High-Yield Savings Account powered by Raisin, you would earn about $424 within a year. In contrast, a Chase Savings Account pays out at a rock-bottom APY of 0.01%. At that rate, it's almost pointless to do the math but if you like your copper Abes, you'd make about $0.80 on $8,000 in 12 months.When is a Chase savings account worth it? I'm not going to lie -- I have a Chase account. I don't keep a lot of money in it, but I do keep some. The reason is that I live four blocks from the Chase bank in downtown Portland and like the security of having some money within reach. When I need to withdraw cash (rare but it happens), I can just go in person and use the ATM. And when I need to deposit cash -- birthday money, thanks Mom -- I can do it without jumping through hoops. If you want banking convenience like this, a high-yield savings account through Raisin or any other online bank will likely frustrate you. Raisin is a case in point: When you deposit money in a Raisin-powered account, you transfer it from an external account (which could be a savings account at Chase) into a service bank (Lewis & Clark Bank), which is then transferred into a custodial account at the bank account of your choice (a Customers Bank High-Yield Savings Account or a Western Alliance Bank High-Yield Savings Account, for example). If you want to withdraw this money, you have to transfer it back to your external account, which could take a few business days. For those who need cash fast, each nail-biting day might make that high yield not worth the stress. So you might have to diversify. Truthfully, it's best to keep a little money within easy access for emergencies, but not so much that you miss out on today's high rates. If you've engorged your Chase Savings Account, take a look at some other top-paying savings accounts to see how much you could earn in interest. If your savings is anywhere near the median -- $8,000 -- you could potentially pick up at least $400 on your savings.
3 Banking Predictions for 2024
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By: Maurie Backman | Updated - First published on Nov. 24, 2023
Since March 2022, the Federal Reserve has been raising interest rates to slow inflation. That's caused a world of upheaval for borrowers who are now facing higher interest rates on everything from credit card balances to personal and auto loans.The one silver lining, though, is that higher interest rates are benefitting people with money in savings accounts and CDs. But will that continue into 2024? Without a crystal ball, we can't predict what's in store for banking with certainty. But here are a few probable scenarios.1. Savings account rates will remain competitive but fall as the year goes onRight now, it's possible to score well above a 4% APY on a high-yield savings account. But will that be possible throughout 2024? Maybe, but it's not certain.The Fed is expected to cut rates in 2024 if inflation continues to cool. That could result in lower interest rates for savers with money in the bank.That said, savings account rates will likely remain competitive next year. So if you need a good place for your emergency fund, a high-yield savings account will still be a wise choice, as you can earn interest while keeping your money safe. But don't be surprised if you don't earn quite as much interest on your savings in the new year as in 2023.2. Short-term CDs will be attractive Like savings account rates, CD rates are competitive right now following the Fed's actions. And chances are, that will still hold true in 2024. But banks may be more willing to offer higher rates for short-term CDs than longer-term CDs in 2024 in anticipation of broad rate cuts. So you may find that you're able to earn more on a one-year CD than on a five-year CD.3. Long-term CD rates could drop more substantiallyBanks commonly reward savers who open long-term CDs with higher interest rates than shorter-term CDs. But we may see the opposite in 2024 due to projected rate hikes from the Fed.This isn't to say that opening a longer-term CD won't make sense in 2024. But we could end up seeing lower rates next year than the rates that are available for five-year CDs today. So if you're interested in opening a five-year CD, you may not want to wait until the new year, but rather, take action in the coming weeks. All told, there's a good chance that banks will be able to continue to offer attractive interest rates on savings accounts and CDs in 2024. But it's good to have a sense of changes that might arrive as inflation continues to moderate.Of course, that's not guaranteed to happen, either. And if inflation picks up and the Fed is forced to raise rates in the new year, all of the above predictions could be a bust. But since that's not expected to happen, you may want to assume the projections above are reasonably spot-on -- and sock your money away accordingly.
How to Find Items That Are Marked Down to 1 Penny at Dollar General
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The Hidden Downside of Always Flying Business Class
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By: Lyle Daly | Updated - First published on Nov. 5, 2023
I flew business class for the first time a little over five years ago, on an eight-hour flight back to the United States. While I had flown first class on domestic flights before, this was a whole new level of travel for me. A seat that turned into a bed? I was hooked. My immediate reaction was "This is how I always want to fly."And that's what I've done. Travel is one of the things I don't mind spending money on, so flying in business class is worth it to me. I've also used quite a few travel credit cards to cover the cost of some of that airfare in miles instead of cash.There's a lot to like about flying business class. The seats are definitely much more comfortable, especially when they're lie-flat seats. The meals can be pretty impressive, at least for something served on an airplane. Most people would probably assume there aren't any real downsides, besides the higher cost.It's mostly as good as advertised. But when you always fly business class, there is a potential downside that doesn't get talked about much.Your travel standards go way, way upA single flight in business class might not change the way you look at travel. It's nice, but you may consider it a one-time thing, or a way to treat yourself on special occasions.On the other hand, if you always fly in business class, then it's almost certainly going to raise your travel standards. You get used to that level of service and luxury. Now, this isn't necessarily a bad thing, but it does have consequences.For one, it becomes normal for you. It's hard to go back to flying economy once you've gotten used to the perks of business class. And even business class loses some of its magic. Don't get me wrong, I still love it. But it doesn't wow me nearly as much as it did the first couple of times. At this point, I know the drill.It doesn't just raise your standards for air travel, either. It will probably raise them across the board. When you always treat yourself to a nice flight, you may feel like you should do the same with your accommodations. No more hostels, questionable Airbnbs, or budget hotels. If you're going to get to your destination in style, shouldn't you stay in a nice hotel, too?There's a good chance you'll start expecting more from your travels. To get more, you usually need to pay more. Between airfare and hotels, you could end up spending much more than you used to.Embrace the change -- or don'tTo reiterate, there's nothing wrong with having high standards when you travel. Many people go from budget travel as young adults to more expensive trips as they get older. If you want to fly business class for every trip and stay in premium hotels, you shouldn't feel bad about it. Everyone has their priorities with how they spend their money.You should, however, be ready for the costs involved. It's not worth going into debt just so you can travel in luxury. Here are a few ways to finance those business-class flights, fancy hotel stays, and meals at Michelin star restaurants.Set up a travel fund and contribute to it every month. Open a high-yield savings account to serve as your travel fund. If you already have a savings account, you can also set up a sub-savings account specifically for travel. Then, decide how much you'll transfer to it every month.Cut back on other expenses so you have more money to spend on travel. If travel is a priority for you, that may mean spending less on other, less important expenses. For example, I haven't had a car for years because I can get around fine without one. Instead of an expensive car payment, I'd rather have more money I can spend on vacations. Part of improving your personal finances is deciding where you can spend and get the most out of your money.Get a travel credit card and use it to pay for all your purchases. Travel cards earn rewards that you can use to cover travel expenses. If you love to travel, it makes sense to have one of these credit cards. You can use it to pay for your regular expenses, and then use the rewards you earn to save on your travel costs.You may also discover that you're fine with any type of trip. Some travelers don't care about all the bells and whistles. There's no right or wrong way to travel. Just know that if you start making higher-end travel a regular part of your life, it can be hard to go back.