A credit score holds a lot of weight when it comes to borrowing money. A good credit score lets you easily take out loans, lease a car, rent an apartment, or even get a job. It can also save you hundreds of dollars. In fact, there is no downside to having a good credit score. But, what is considered a good credit score?
Credit Score in a Nutshell
Your credit score sums up your financial history in one three-digit number. This number shows lenders your ability to pay back a loan. Factors like debt, the length of your accounts, your payment history, your types of credit, and your new credit play a role. Skipping rent payments, not paying medical bills, racking up back taxes, and even opening a banking account all negatively affect your score—at least for a short period of time.
Who Calculates My Score?
Three national credit bureaus calculate your credit score. These three entities, Equifax, Experian, and TransUnion, update and store credit histories on most U.S. consumers. All three companies use slightly different methods for calculating scores and collecting data. This means that you can have a different score from each bureau. For example, Equifax might note your missed car payment, but Experian and TransUnion might miss it. Your Equifax credit report would then show a lowered credit score, but your other two scores will not be affected.
How Do I See My Scores?
To view your credit scores, request a free credit report from each bureau. As time passes, scores change due to how they are calculated. Request all three at the same time for the most accurate comparison. If you want a quick look at your credit score, many banks or financial planning apps can pull up your score for free. This number may be outdated, but it can give you an idea of the category your score falls into.
Credit Score Categories
Most credit scores fall within the range of 300-850. Within that range, a credit score can be broken down into five categories:
- Exceptional credit: 800+
- Very good credit: 740-799
- Good credit: 670-739
- Fair credit: 580-669
- Poor credit: 579 and below
Keep in mind that the categories are general. Lenders will view and value your credit differently. For example, a good credit score for leasing a car might not be good enough for securing a home loan. A good rule of thumb is to shoot for credit above 700. This will give you flexibility when it comes to opening new lines of credit.
Good Credit Scores Based on Loan Type
Are you hoping to take out a mortgage or student loan, but are wondering what is considered a good credit score to do it? Each lender or credit type comes with its own definition of “good,” and it might not fit into the categories above.
What is Considered a Good Credit Score For Student Loans
Federal Student Loans
Federal student loans do not take your credit score into account. You could have no past credit history at all and it wouldn’t factor into your eligibility for federal student loans at all.
Private Student Loans
Unlike federal student loans, private student loans look at your credit score when you apply. This helps them decide whether to approve you and what interest rate to offer. Most students, especially those under age 21, will need a co-signer to qualify. In 2015-2016, only 6% of undergrads secured a student loan without a co-signer. For a shot at qualifying as a sole borrower, you need a credit score in the 700s. If you fall into that range, you will likely qualify for the loan and a lower interest rate. If your score is not in the range, look to add a co-signer who is.
What is Considered a Good Credit Score For A Home Loan?
A mortgage is the largest loan that most consumers take out. In general, these loans take 30 years (360 monthly payments) to pay back. A huge chunk of your monthly payment is interest. A difference of just a few points in your score could significantly reduce your monthly payments. What is considered a good credit score for taking out a mortgage? Scores falling in the 720 to 760+ range will get you good to excellent interest rates.
You can secure a mortgage with scores as low as 580, but you will have fewer options with higher interest rates. If you can, hold off on applying for your mortgage until you bring your score up. In just 30 days, you can improve your credit score. A month’s time and a little focus on your credit could save you up to hundreds of dollars each month.
What is Considered a Good Credit Score For An Auto Loan?
Buying a car is a costly and sometimes unexpected expense. As with any loan, auto loans have fixed interest rates that depend heavily on your credit score. A good credit score for an auto loan is 740 to 850. You can take out an auto loan with a lower score, but you will pay more. In general, the higher your score, the lower your interest rates. Here are the average interest rates for new car auto loans based on credit score range:
- 781-850 Range: 3.08% interest rate
- 661-780 Range: 3.99% interest rate
- 601-660 Range: 6.83% interest rate
- 501-600 Range: 11.11% interest rate
- 300-600 Range: 13.95% interest rate
What is Considered a Good Credit Score For Credit Cards?
Credit cards let you spend money on the promise that you will pay it back plus any related fees. It makes sense then that credit card companies highly value your credit score. For the majority of credit cards, you need a score of at least 700. This is considered “good” credit in the eyes of most banks. If you want the best credit cards with the most rewards and cash back bonuses, you need an excellent credit score of 750+.
For those with scores in the 600 to 699 range, you can still get approved for a credit card. Cards that accept individuals with fair credit are good first credit cards or first new cards after recovering from bad credit. Keep in mind that banks also consider your income, debt levels, and recent payment history while making their decision.
Other Benefits of Having a Good Credit Score
Along with securing solid credit cards and low-interest rates, a good credit score brings with it a few other bonuses.
- Land your dream apartment: Many landlords look at your credit score before approving a lease application. Good credit will tell them that you are a low-risk renter and will likely pay them on time. If you have less than good credit, you might have to pay a larger security deposit and down payment.
- Lower car insurance payments: Car insurance companies use a different version of your credit score to determine your insurance rates. Insurance companies give low risk drivers their lowest rates. They want to see a high credit-based insurance score, a stellar driving history, and no claims on record.
- Save money: Good credit leads to lower interest rates on loans and more cash back from credit cards. Use the myFICO Loans Savings Calculator to see how much money your credit score can save you. Just input the loan type, your state, the loan’s principal amount, and your current FICO score range. It will show you how much you will save or pay extra if your credit score moves into a new category.
- Become more employable: Employers learn a lot about you from your credit score. Your score indicates your quality of work and your ability to manage money. This is especially important for financial- or banking-related jobs. Employers choosing between two highly qualified candidates may go with the girl whose credit score is higher.
Even if you do not anticipate taking out a loan, renting an apartment, or applying for credit cards anytime soon, it never hurts to improve or start building your credit score. Plus, doing the legwork now will make it easier when you are ready to buy your first home, borrow student loans, or apply for a job. Remember, there is no downside to having good credit.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.