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Easy access to free credit scores has helped many Americans improve their credit. But at a certain point, chasing every possible point gets you nothing except bragging rights.
How do you know when your credit score is high enough for you to relax?
Checking your credit score is a bit like checking your weight. You don’t need to obsess over every fraction of a pound, and an occasional indulgence (or high credit card balance) won’t do lasting damage if your habits are generally healthy.
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Most credit scores are on a scale of 300 to 850. Nationally, the average credit score is 717 for FICO 8, as of October 2023, and 700 for its competitor, VantageScore 3.0, as of October 2023. So that’s one way of comparing your number.
But being about average doesn’t necessarily put you in the best position to qualify for the credit product you want at decent interest rates. A score of 720 or better puts you in the "excellent" credit score range.
Atlanta-based credit expert John Ulzheimer, who has worked for FICO and credit bureau Equifax, says a healthy range depends on what your goals are. If you want to buy a car, you probably need a score of at least 720 to get the lowest interest rates, he says.
If you want to qualify for a mortgage with the best terms or a top-tier rewards card, Ulzheimer suggests you aim for at least a 760 — and higher is safer.
Morris Armstrong of Connecticut, founder of Armstrong Financial Strategies, likes having a score cushion. “I think that if your numbers are above 780 that you are fine and should not worry. That is still an excellent number, but if you are competitive — and I understand that it is now trendy — then you will want to achieve a higher bragging-right number.”
A “perfect” score — an 850 on the most commonly used scale — requires a credit history spanning many years and having few or no credit missteps. And, as far as lenders are concerned, someone with a 780 or so is every bit as likely to repay borrowed money as someone with an 850.
Ultimately, your score is a tool to get approved for credit products that help you achieve your goals. Reaching those goals is more important than obsessing about a couple of points on your score.
Check your credit health
If you’re not sure where your credit score stands, there are plenty of ways to check it. NerdWallet offers a free credit score, as do many other personal finance websites and some credit card issuers.
If you have years of on-time payments and use your credit cards fairly lightly, you probably have a decent score. If you are younger, it may take a little time to build a great score, and learning about how credit works is a good way to do that.
If there’s a certain product you want, say a mortgage or a travel rewards card, you can often get a general idea of the minimum score needed for approval. It’s best to be comfortably above that because your scores fluctuate a bit depending on your recent financial activity.
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Habits that help
Healthy credit habits, practiced consistently, build high scores. For best results:
Pay on time, every time. Payment history is the largest of the factors that affect your credit score, so pay attention to it.
Use only a small portion of your credit limit. The next biggest influence on scores is “credit utilization,” your balance relative to your credit limit on each card.
Keep cards open unless you have a compelling reason — such as fees you think are not worth it or poor customer service — to close them. You want to show a long history of using credit responsibly.
Space credit applications at least six months apart, making sure to research the best credit cards for your needs before applying.
Check your credit score at least monthly to see how your spending and payment behaviors affect your score.
And if you make a mistake? Expect to see it reflected in your score. But you can speed recovery by getting back in the routine of the healthy habits above.
Some mistakes fade more quickly than others. A late payment can damage your score for some years. High credit utilization, on the other hand, stops hurting your score once your lender reports you’ve paid down the high balance.
You can try to squeeze out every possible point, but if your score is comfortably high, it’s unlikely to boost your borrowing power. Once you’re well into the worry-free zone, you can cruise if you want to.
Generally speaking, a good credit score is 690 to 719 in the commonly used 300-850 credit score range. Scores 720 and above are considered excellent, while scores 630 to 689 are considered fair. Scores below 630 fall into the bad credit range.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2022, the average FICO® Score☉ in the U.S. reached 714.
Less than 2% of Americans have a perfect credit score.
“If you're at 760, or 780, you're already getting the best you can get,” Jim Droske, president of the credit counseling company Illinois Credit Services, said. “You're already hitting that pinnacle of what lenders care about. Anything above that is just pride.”
The time it takes to raise your credit score from 500 to 700 can vary widely depending on your individual financial situation. On average, it may take anywhere from 12 to 24 months of responsible credit management, including timely payments and reducing debt, to see a significant improvement in your credit score.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Conventional lenders now require a 780 credit score or higher to qualify for the lowest mortgage interest rates, so anything above 780 is considered an excellent score to buy a house.
A credit score of 999 from Experian is the highest you can get. It usually means you don't have many marks on your credit file and are very likely to be accepted for a loan or credit card.
Your 840 FICO® Score falls in the range of scores, from 800 to 850, that is categorized as Exceptional. Your FICO® Score is well above the average credit score, and you are likely to receive easy approvals when applying for new credit. 21% of all consumers have FICO® Scores in the Exceptional range.
But according to Experian data captured as 2023 came to a close, nearly 22% of consumers have a FICO Score in the highest credit score range—800 to 850. Consumers with scores in this range are considered to have exceptional credit.
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
How long after paying off debt will my credit scores change? The three nationwide CRAs generally receive new information from your creditors and lenders every 30 to 45 days. If you've recently paid off a debt, it may take more than a month to see any changes in your credit scores.
Credit scores are calculated using a specific formula and indicate how likely you are to pay back a loan on time. But while paying off debt is a good thing, it may lower your credit score if it changes your credit mix, credit utilization or average account age.
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
Banks in India use the TransUnion CIBIL, Experian, Equifax, or the CRIF High Mark score. Out of these, the TransUnion CIBIL score is the one that is used most commonly. All credit rating bureaus generate credit scores and reports which help lenders assess the creditworthiness of borrowers.
Every late payment shows up on your credit score and having a history of late payments combined with closed accounts will negatively impact your credit for quite some time. All you have to do to break this habit is make your payments on time.
You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
You can borrow over $100,000 with a 780 credit score if you get a mortgage or a home equity loan. Keep in mind, the exact amount of money you will get depends on other factors in addition to your credit score, such as your income, your employment status and even the lender.
In the U.S., only about 1.7 percent of the scorable population had a perfect 850 FICO credit score in April 2023, according to FICO data. This suggests that for most people, a perfect score is simply too hard to reach — but it also suggests that it's not really necessary, either.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
Introduction: My name is Kelle Weber, I am a magnificent, enchanting, fair, joyous, light, determined, joyous person who loves writing and wants to share my knowledge and understanding with you.
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