Your credit score isn’t just a random number.
These three digits affect almost everything in your financial life, from the interest you’ll pay on loans, to whether you can rent that apartment you love.
That’s why getting familiar with what is a good credit score and learning how to make yours the best it can be is one of the smartest money moves you can make.
In this article, you’ll discover:
- What is a good credit score.
- The differences between FICO and VantageScore, and which one matters more.
- Why your credit score is such an important part of your financial picture.
- Actionable strategies to improve your credit score, regardless of where you are now.
- How to keep tabs on your credit to protect your financial health.
Let’s explore what your credit score really means and how you can make it work to your advantage.
Understanding Credit Scores
Think of your credit score as your financial report card.
When lenders, landlords, or employers look at this number, they’re basically checking to see if you’ve been financially responsible. Do you pay your bills on time? Do you max out your credit cards?
A credit score is a three-digit number ranging from 300-850 that sums up your creditworthiness based on your history with borrowing and repaying money. Put another way, it’s like a financial snapshot that tells lenders how likely you are to pay back what you borrow.
Your credit score comes from information in your credit reports, which keep tabs on your credit cards, loans, and payment history. These reports are maintained by the three major credit bureaus: Equifax, TransUnion, and Experian.
Here’s a surprising fact: You don’t have just one credit score. Your score can vary depending on:
- The credit bureau that provided the information.
- The scoring model used.
- When your score was calculated.
This explains why you might see different scores from different sources or at different times.
VantageScore vs FICO
When it comes to credit scores, there are two big names you need to know: FICO and VantageScore.
FICO (Fair Isaac Corporation) has been the gold standard for credit scores for over 30 years.
According to FICO, 90% of top lenders use its scores to make lending decisions. When a mortgage lender or credit card company asks about your credit score, they’re usually referring to your FICO Score.
VantageScore was created in 2006 by the three major credit bureaus (Experian, Equifax, and TransUnion). While FICO is still the go-to source for credit scores, VantageScore is quickly gaining ground. Its usage soared to a record nearly 42 billion scores in 2024, up 55% from the year before.
VantageScore uses information like your rent and utility bill payments to compile your credit profile, and needs just one month of credit history to generate a score.
On the other hand, you need at least six months of credit history to get a FICO score.
FICO and VantageScore have created multiple versions of their scoring models over the years, with each version using slightly different calculations. However, both models prioritize payment history as the most important factor (FICO weighs it at 35% while VantageScore puts it at 40%).
Where they differ is in how they weigh other factors like credit utilization, length of credit history, and types of credit accounts. That’s why your FICO Score and VantageScore might tell different stories, even when looking at the exact same credit report.
The Credit Score Range: What Do the Numbers Mean?
Credit scores typically range from 300 to 850, with higher scores showing lenders that you’re more financially responsible and therefore more likely to repay your debts.
Here’s a breakdown of what different credit score ranges generally mean:
FICO Score Ranges
- Exceptional (800-850): You’re at the top of the credit score range. You’ll likely qualify for the best rates and terms on loans and credit cards, and may have some room to negotiate with lenders, even if your credit score dips a little.
- Very Good (740-799): You’re above the national average and will likely qualify for the lowest advertised rates from lenders.
- Good (670-739): You’re considered a reliable borrower, meaning you’d qualify for many low-fee loans and credit cards with lower interest rates.
- Fair (580-669): You may be approved for credit, but likely with less favorable terms or higher interest rates.
- Poor (300-579): You may find it difficult to get approved for credit, or you may only qualify for secured credit products.
VantageScore Ranges
- Super Prime (781-850): Excellent credit.
- Prime (661-780): Good credit.
- Near Prime (601-660): Fair credit.
- Subprime (300-600): Poor credit.
The average FICO Score in the U.S. is 715, which falls into the “Good” credit category. This represents a slight decline from previous highs, but it shows that many people are still maintaining good credit despite recent economic pressures.
Why Is a Good Credit Score Important?
Having a good credit score doesn’t just look nice on paper—it offers real, practical benefits that can save you money and lead to better financial opportunities.
Here’s why maintaining a good score matters:
Better Interest Rates
When you have a good credit score, lenders are more willing to offer you loans with lower interest rates, translating to thousands of dollars in savings over the life of a loan.
Imagine two friends, Mike and Ann, are both buying similar $350,000 homes:
- Mike has a credit score of 620 (fair) and qualifies for a 7.5% interest rate. His monthly payment is $2,450.
- Ann has a credit score of 780 (very good) and qualifies for a 6.5% interest rate. Her monthly payment is $2,210.
Ann saves $240 every month compared to Mike—that’s $2,880 per year and over $86,000 in interest savings over the life of their 30-year mortgages! All because of the difference in their credit scores.
Higher Approval Odds
A good credit score gives you a much better shot at being approved for credit cards, loans, and other financial products.
This becomes very important when you need to borrow money for big purchases like a home or car, or even when applying for a new credit card with great rewards.
Better Terms and Higher Limits
Beyond better approval rates, a good credit score can help you qualify for higher credit limits, lower fees, and more favorable loan conditions, meaning:
- Lower or no annual fees on credit cards.
- Higher credit limits that give you more spending flexibility.
- Fewer required security deposits.
- More flexible payment options.
These advantages give you more financial breathing room and options for managing your money.
Lower Insurance Premiums
Research shows that people with better credit histories tend to file fewer claims, which is why insurers frequently offer lower premiums to customers with higher credit scores.
With a good credit score, you could pay less for the same auto, homeowners, or renters insurance coverage.
Rental Approval
Landlords often check credit scores when deciding whether or not to rent to you.
A good score can make it easier to get approved for an apartment or house rental, and might even help you avoid having to pay a larger security deposit.
Employment Opportunities
Some employers check credit reports (though not credit scores) as part of the hiring process, particularly for positions with financial responsibility.
A positive credit history could give you an edge in the job market.
How To Improve Your Credit Score
Whether you’re starting from scratch or working to repair damaged credit, there are several proven strategies to help you improve your credit score.
That said, you still need commitment, patience, and the right approach to make it happen.
Payment History
Your payment history is the most important aspect of your credit score, making up a whopping 35% of your FICO Score.
Paying your bills on time, every time, is the most effective way to maintain or improve your credit score.
One late payment can cause your credit score to drop by 50 to 120 points, depending on your history and how far behind you are. Late payments can stay on your credit report for seven years, but their impact can dwindle over time if you keep up good habits afterwards.
If you sometimes struggle to remember when bills are due, try:
- Setting up automatic payments for at least the minimum amount due.
- Creating calendar reminders a few days before the payment due date.
- Signing up for payment alerts through your bank, credit card apps, or billing companies.
- Calling your creditors before you miss a payment. If you’re having financial troubles or have been affected by a natural disaster, job loss, or medical emergency, some creditors offer hardship programs that may help.
Making consistent payments can help improve your credit score over time. The key is finding a system that works for your lifestyle and sticking with it.
Credit Utilization
Credit utilization refers to how much of your available revolving credit you’re using at any given time.
It primarily applies to credit cards and other lines of credit (not installment loans like mortgages or car loans). It’s calculated by dividing your total balances by your total credit limits.
For example, if you have a $5,000 credit limit and a $1,500 balance, your credit utilization is 30%.
Essentially, credit utilization shows lenders how well (or not) you’re managing your debt. Lower credit utilization rates generally lead to better credit scores.
Financial experts recommend keeping your utilization below 30%, but for the best scores, aim for below 10%.
Here are some strategies to reduce the amount of credit you’re using:
- Pay down existing credit card debt.
- Make small payments throughout each 30-day billing cycle to keep balances consistently low.
- Request credit limit increases (while avoiding the temptation to spend more).
- Keep older credit cards active with occasional small purchases, even if you don’t use them as your primary cards.
Keep in mind, credit card companies typically report your balances to credit bureaus throughout the month, so keeping your usage as low as possible can help make a positive impact on your score.
Length of Credit History
The longer your credit history, the better it is for your score. This factor considers:
- The age of your oldest account.
- The age of your newest account.
- The average age of all your accounts.
To maximize this component of your score:
- Keep older credit cards or loans in good standing. Closing your oldest accounts can shorten your credit history and potentially lower your score.
- Be selective about new credit applications, as each new account lowers the average age of your accounts. When you open several new accounts at once, credit scoring models may view this as a sign that you’re relying too heavily on credit to meet financial obligations and ding your score.
If you don’t have any credit history yet, you’ll need to open at least one account to begin building your credit. While having a few accounts on your credit report is better than just one, the important thing is to manage them responsibly and always pay on time.
Credit Mix
Lenders like to see that you can manage different types of credit. Having a mix of revolving credit (like credit cards) and installment loans (like auto loans or mortgages) can positively impact your score.
However, don’t take out loans just to improve your credit mix. Only apply for credit you actually need and can manage responsibly.
New Credit
Every time you apply for credit, a hard inquiry appears on your credit report.
Too many hard inquiries in a short period can lower your score because it may suggest to lenders that you’re actively seeking multiple sources of credit, or taking on more obligations than you can handle financially.
To minimize the impact:
- Only apply for new credit when you need it.
- When shopping for specific loans like mortgages or auto loans, complete your applications within a short window (14-45 days, depending on the scoring model).
- Before applying, check whether you can prequalify for loan offers. These usually count as soft inquiries, which don’t affect your score.
Being strategic about when and how you apply for credit can help protect your score, while still allowing you to shop around for the best rates and terms.
Bonus: Check Your Credit Reports
Regularly reviewing your credit reports is vital for maintaining good credit. Errors such as accounts that don’t belong to you, or incorrect payment statuses can unfairly drag down your score.
You can get free credit reports from each of the three major credit bureaus once a year through AnnualCreditReport.com. Review these reports carefully and dispute any errors you find directly with the credit bureau.
Important note: Your annual free credit report doesn’t include credit scores.
Some common errors to look for include:
- Accounts that don’t belong to you.
- Late payments that were actually made on time.
- Incorrect credit limits or loan amounts.
- Accounts showing as open when they’ve been closed.
- The same debt listed multiple times.
If you find an error, gather documentation to support your claim (like payment records, account statements, or correspondence) and file a dispute with the relevant credit bureau. The bureau must investigate your claim within 30-45 days and correct any verified errors.
Taking Control of Your Credit Future
Now that you understand what is a good credit score, you can use this knowledge to help expand your financial possibilities.
However, remember that your credit score isn’t written in stone—it changes over time based on your financial habits. Even more encouraging, you have the power to influence it!
With consistent, responsible money habits, you can build and maintain a score that creates opportunities instead of limitations.
Kudzu is here to help you on this journey.
Our mobile banking app includes features that support healthy financial habits: automatic savings options, spending insights, and regular account notifications that help you stay on top of your finances.
You can use these tools to develop the consistent payment history and responsible credit usage that lead to better credit scores over time.
Download the Kudzu app and start building better money habits with a company that’s invested in your long-term financial well-being.
