Updated: Jul 28
Your credit score is a three-digit number that represents your creditworthiness. Lenders use it to determine whether to approve you for credit, such as a mortgage, car loan, or credit card. But what is a good credit score? In this post, we'll explore the answer to that question and what it means for your financial future.
What is a good credit score?
A good credit score is generally considered to be 670 or higher. This means that if your credit score is 670 or higher, you are likely to be approved for credit with favorable terms, such as a low interest rate.
Credit Score Ranges
Here is a breakdown of credit score ranges, according to Experian, one of the three major credit bureaus:
Very Good: 740-799
Why is a good credit score important?
A good credit score is important because it can impact your ability to qualify for credit, the interest rate you receive, and the terms of your loan. For example, if you have a low credit score, you may be denied credit or may be required to pay a higher interest rate. On the other hand, if you have a good credit score, you may be approved for credit with a lower interest rate, which can save you money over the life of the loan.
What do the statistics say?
Now that we've answered the question of what is a good credit score, let's take a look at some statistics to see how prevalent this issue is.
According to a report by Experian, as of the fourth quarter of 2020, the average credit score in the United States was 711. This represents a slight increase from previous years and indicates that consumers are generally doing a better job of managing their credit.
Furthermore, according to the same report, the percentage of consumers with a credit score of 800 or higher has increased in recent years. As of the fourth quarter of 2020, 21% of consumers had a credit score of 800 or higher, up from 19% in the fourth quarter of 2019.
How can you improve your credit score?
If you have a low credit score or want to improve your score, there are several steps you can take:
1. Pay your bills on time
One of the most important factors that impact your credit score is your payment history. By paying your bills on time, you can show lenders that you are a responsible borrower and improve your credit score over time.
2. Keep your credit utilization low
Your credit utilization ratio is the amount of credit you are using compared to your total available credit. By keeping your credit utilization low, you can improve your credit score and show lenders that you are responsible with credit.
3. Check your credit report regularly
Checking your credit report regularly can help you identify errors or fraudulent activity that may be impacting your credit score. You can obtain a free copy of your credit report once per year from each of the three major credit bureaus.
4. Avoid opening too many new accounts
Each time you apply for credit, it can result in a hard inquiry on your credit report, which can lower your credit score. Avoid opening too many new accounts at once to keep your credit score in good standing.
A good credit score is generally considered to be 670 or higher, and it is important for your financial future. By paying your bills on time, keeping your credit utilization low, checking your credit report regularly, and avoiding opening too many new accounts, you