You’re generally considered in the good credit score category once you have a score of around 660 to 670 on a typical credit score range of 300 to 850 in the United States. An excellent credit score typically starts at 750. Getting a good credit score can take time, especially if you just moved to the U.S. — but it’s not an impossible task.
Once you know how credit scores work, you can take steps to build your credit history and responsibly manage your accounts. Over time, this could help increase your scores. To better understand why there are different score ranges, let's take a quick look at how credit scoring works in the United States and why credit is important.
Why credit scores matter
Having a good credit score can be important for many reasons and the difference between having a poor credit score and good credit score can be thousands (sometimes hundreds of thousands) of dollars over your lifetime.
A higher score can help you get the better rates and offers on the best credit cards, a better line of credit, and loans. Whether you're trying to take out a small personal loan, a private student loan, or borrow several hundred thousand dollars to purchase a home, having good credit can help you qualify for a lower interest rate, fewer fees, higher loan amount, and more favorable repayment terms.
Even if you never take out a loan or open a credit card, your credit can be important to your financial and personal life.
In most states, your credit history can impact your insurance rates and having poor credit can lead to paying higher auto and homeowners insurance premiums. Additionally, your credit may be a factor when you're applying for a job, want to rent a home, are setting up a new account with a utility or cell phone provider.
You might have trouble getting certain types of jobs if you have a bad credit history. It can also be hard to get approved for a rental home, or you may have to pay a larger down payment even if you are approved. Additionally, you could have to pay a security deposit before you can turn on utilities, internet, or television service for your home.
Who creates credit reports?
Many credit scores are based entirely on the information in one of your credit reports.
In the U.S., there are three primary nationwide consumer reporting agencies (CRAs) that create consumer credit reports: Equifax, Experian, and TransUnion. These CRAs are sent information from creditors and collects information on millions of residents and uses this information to create credit reports.
For example, if you apply for a credit card and get approved, the credit card issuer may send information about your account to one, two, or all of the three major CRAs. If this is the first time you've had an account reported to the CRAs, it will be the only account (known as a "tradeline") in your credit report.
The credit card company may report your name, address, date of birth, Social Security number (if you have one), and phone number from your application to the CRAs. It can also report your account information, such as when you opened the credit card and your credit limit. It can then update the CRA each month to report your card's balance, your payment amount, and whether you paid on time or were late.
Most of the information on your credit report comes from companies (called data furnishers, or just furnishers for short) reporting your account information to the CRAs. Additionally, the major credit bureaus may collect some types of public records from the U.S. court system, such as whether you've declared bankruptcy, and add this to your credit reports.
One important thing to remember is that although the major credit bureaus often get grouped together, they're competitors and they might not have the same information about you. Partially this is because furnishers aren't required to send info to the CRAs and the CRAs don't generally need to share data with one another. As a result, it's common for there to be differences between your credit reports.
Who determines your credit scores?
Your credit reports and credit scores are separate but related. So-called “generic” credit scores are generally based entirely on the information in one of your credit reports, and each credit score model (the software that turns the information in your report into a score) is created with a specific intent in mind.
FICO (formerly Fair Isaac and Company) and VantageScore (a credit scoring agency created by the major CRAs) are the main two companies that create and sell generic credit scores—scores that multiple lenders and creditors can use. Additionally, some creditors create custom credit scores that they use in addition to (or instead of) a generic score, and each of the CRAs offers credit scores along with credit reports.
Both FICO and VantageScore offer base generic scores that try to predict the likelihood that a person will fall 90 or more days behind on a bill in the next 24 months. These base VantageScore and FICO scores can range from 300 to 850. FICO also creates industry-specific credit scoring models for auto loan and bankcard companies that have a larger credit score range of 250 to 900.
With all these models, a higher score is better and a lower score indicates someone is more likely to miss a payment, which is why creditors might not approve that person's application or charge the person a higher interest rate.
Similar to how other types of computer software gets updated, FICO and VantageScore periodically update their scoring models. As a result, there are multiple versions of each scoring model and each credit scoring model may use slightly different weighting or criteria to determine your credit score. The latest base score versions are VantageScore 4.0 and FICO Score 9.
How to check your credit score
You can get one free copy of your credit reports from all three bureaus at AnnualCreditReport.com once every 12 months. However, these reports don't come with a credit score. If you want to check your credit scores, you'll either need to pay for your scores or sign up for a service that gives you a free credit score.
Many banks, credit unions, lenders, nonprofit credit or financial counseling organizations, and credit card issuers offer free FICO scores to current customers. FICO maintains a list of some of the companies that offer free FICO scores to customers. You can check with the companies you already have accounts with to see if they already offer this free benefit, or you might consider opening a new account with the company to get access to your credit score.
There are also companies like Credit Karma and Credit Sesame that give you free credit reports along with scores based on those reports. These non-lender providers often offer VantageScore 3.0 credit scores and you can check your scores for free without having to open a new account or credit card. They may also free credit monitoring which alerts you if there's a change in one of your credit reports. You can find a list of free options on the VantageScore website.
If you're checking your score at multiple places and find you have different credit scores don't worry. The companies may offer different types of credit scores or the scores could be based on different credit reports.
What factors impact your credit score?
The factors that impact your credit scores and their relative importance will depend on the type of credit score. However, generic credit scores often look at similar criteria. Even FICO's industry-specific scores are built on top of the base scores and consider the same main factors, but give extra weighting to your history of repaying a car loan or credit card for the auto and bankcard scores, respectively.
Some of these credit scoring factors include:
- Your payment history
- Your credit utilization ratio
- Whether you've declared bankruptcy
- How many credit accounts you have
- Whether you have experience managing different types of accounts
- How many new accounts you've applied for recently
- If you've recently opened new credit accounts
- The length of credit history, including your average age of accounts and the age of your oldest and newest account
There are also certain things that don't impact your credit scores. For example, in the U.S., FICO and VantageScore credit scores won't consider your:
- Name, address, gender, age, marital status, or sexual orientation
- National origin, citizenship status, race, or ethnicity
- Income or employment history
- Religious or political affiliations
If you're reviewing your credit report, you'll notice much of this information isn’t even in the report.
How to get a good credit score
Getting a good score can require persistence and patience while you build a positive credit history. Here are a few suggestions based on the credit scoring factors:
Pay your bills on time. Having a long history of on-time payments with your accounts is good for your scores. Setting up automatic payments for at least your minimum amount due is one way to ensure you don’t accidentally miss a payment.
While a single late payment won't destroy your chances of getting a good score, it can immediately drop your score and it could take months to recover. Also, although you only need to make a minimum payment to avoid a late payment showing up on your credit report, try to pay off credit card bills in full each month to avoid paying interest on carryover balances.
Keep your credit card balances low. Credit scoring models determine your utilization by comparing your reported credit card balances to the cards' credit limit. For example, if you have a new credit card with a $1,000 limit and you make $500 worth of purchases, you'll have a 50% utilization rate on that card. Keep in mind, even if you pay off your bill every month and aren't carrying any credit card debt, your card issuer may still report a balance to the bureaus when it sends you your monthly statement (often, about three weeks before your bill's due date). If you want to use your credit card, perhaps to earn points or cash back, making early payments to lower your balance before the end of your statement period could help lower your utilization rate.
Your overall utilization rate on your revolving credit accounts (such as credit cards and lines of credit) is an important scoring factor. Keeping your utilization rate as low as possible, while still using your accounts, is best for your scores. If you're focused on improving your credit scores, some personal finance experts recommend using your card to pay a small monthly bill and then paying off the balance in full.
Keep credit cards open. Unless you find yourself overspending with your credit card, or your card issuer charges you an annual fee and you don’t feel it’s worth it, you may want to keep your credit card accounts open. Closing an account can decrease your available credit, which may increase your utilization rate and hurt your scores.
Strategically apply for new accounts. Submitting new credit applicants can lead to hard inquiries, which may temporarily hurt your credit scores. Generally, it’s best to only apply for a new account if you have a specific reason for taking out a loan or getting a new credit card.
Even if you work on your credit history for years, you may never reach the highest possible score, an 850 for most scoring models. However, you can often get the best financing offers even if you don't have an 850. Once you have a score of 800 or higher (or, even above 780 in some cases), you may be in the excellent score range and creditors could offer you the best available interest rates and terms on a new account.
Credit scores in the U.S. versus elsewhere
The American consumer credit industry is highly regulated and may be different than credit in other countries. For example, the federal Fair Credit Reporting Act (FCRA) regulates who can see your credit reports and how long credit reporting agencies can keep negative information in your credit reports. U.S. credit reports also contain positive and negative information (such as your on-time and late payments), while credit reports in some countries only contain negative information.
There are also federal laws that prohibit making a lending decision based on an applicant's race, color, nationality, religion, sex, or marital status. Other countries may not have the same types of protections in place. As a result, credit scoring models could use these factors to determine someone's score. Additionally, the 300 to 850 credit score range, which is standard in the U.S., might not be the same elsewhere.
How to transfer your credit score
If you're moving to the U.S., you'll likely want to bring your credit with you. Unfortunately, the major credit bureaus can't import this information and you may have to start building credit by taking out new loans or credit cards. Even then, you may have to wait at least six months before you can qualify for a FICO score and one month before you can qualify for a VantageScore credit score.
Fortunately, Nova Credit developed technology that connects with global consumer credit bureaus to help people to take their credit with them when they move. Based on your credit history from your home country, Nova builds a Credit Passport® and creates a credit score that aligns with the standard U.S. score range. The information in your Credit Passport® doesn't get copied into your U.S. credit reports, but creditors can use it to evaluate your creditworthiness when you apply for a new account. Once approved, your new account can help you build your credit history in the U.S.