What is A Good Credit Score?
Now that you have gotten this far in this guide with all of the basics explained, you might be wondering just exactly what constitutes a good credit score?
Unfortunately there is no one straight answer to that question, only generalities for which there is always going to be an exception. This is because the formulae for determining a credit score may not be consistent from bureau to bureau and the cut off point where bad credit is distinguished from good credit can be different for each as well.
Of course the higher the score, the better your credit is considered to be. However the benchmark for what constitutes good credit and what constitutes bad credit is not written in stone.
Each lender makes it own decision about where the cut off point is in the numbers that differentiates good credit from bad credit. Most lenders don’t have a single cut-off number but may have many different “credit points†that qualify for different rates and terms.
As a rule of thumb, a credit score of 720 is considered to be the cut off point between good credit and mediocre credit.
Also as noted in the previous section, a credit score is usually only one of numerous factors that count in the lending decision. Although the number is significant, a lender can also decide that other factors may have more of an impact on whether or not the loan should be granted (such as whether or not you have a job.)
Below is a national distribution chart of FICO credit scores so you can see where your credit score is compared to the rest of the population in the United States.
FICO Credit Score Percent with Score
300 – 499 1%
500 – 549 5%
550 – 599 7%
600 – 649 11%
650 – 699 16%
700 – 749 20%
750 – 799 29%
800 – 850 11%
As you can see from looking at the above statistics, most of the population in the United States has a Fico score of 700 or higher. Many lenders use 700 or 720 as the cutoff point for giving borrowers their best rates and terms. 750 is considered to be a good achievable low risk score. Another cut off point below which you can expect to be offered sub-prime rates is 620.
Isaac Fair is in the midst of creating yet another rating called the NextGen. The NextGen has a wider possible score range. Instead of rating credit scores from 300 – 850 they are rated from 150 to 950. This new method of credit scoring takes in many more factors about you then the current system and places you in a variety of groups so that lenders know what is possible to offer you in terms of credit.