What Is Considered a Good Credit Score? A Complete Guide to Understanding Credit Grades

Your credit score is important on several levels. It’s a key variable in the approval process for credit cards and personal loans. It can also affect your ability to get a job or secure an apartment. That makes having a good credit score essential to financial success. This article explains how credit scoring works and how to improve your score. Here are some key takeaways:

• You Can Build or Rebuild Credit at Any Stage
• A "Good" Credit Score Starts at 670–700+
• Credit Scores Function Like Financial Report Cards
• Bad Credit Scores (Below 630) Can Limit Financial Options
• Credit Scores and Interest Rates Are Closely Linked
• Improving Your Credit Score Takes Smart, Consistent Action

Why your credit score matters

The first widely recognized credit score was introduced in 1989 by the Fair Isaac Corporation, a company known today as FICO. The scoring system was created to speed up and standardize creditworthiness evaluation. Banks, credit card companies, and other lenders consider it the “gold standard,” so it’s important to understand how it works.

Credit scores impact almost every area of our lives. Home loans are approved or denied based on them. Leasing a car is difficult when your score isn’t up to par. Even getting a job can be affected, especially if you want to work in finance or accounting. Companies that require the acceptance or management of money almost always check your credit score.

And let’s not forget about debt payments. Good credit scores can help you secure a lower interest rate on a personal loan or credit card. That can save you thousands of dollars in interest payments when you’re paying off long-term debt. Understanding your credit score can help you see the impact. Building credit can help you take advantage of it.

What is considered a good credit score?

Your credit score is calculated using information on credit reports from Equifax, Experian, and TransUnion. Learning how to evaluate credit scores is part of being financially literate. The models vary slightly, but most lenders use the FICO score, which ranges from 300 to 850. According to FICO's guidelines, score ranges break down as follows:

• Poor: Below 580
• Fair: 580–669
• Good: 670–739
• Very Good: 740–799
• Excellent: 800+

VantageScore, another popular model, uses similar ranges but with slight variations in how factors are weighted. Lenders look for credit scores of 670 or higher when assessing applicants for their ability to pay back personal loans. This same risk analysis is also used to set interest rates on mortgages, auto loans, and cash advances.

What is a bad credit score?

Any score below 630 is considered "subprime" by lenders. Low scores suggest a history of late payments, high credit utilization, or potentially serious negative marks like bankruptcies or collection accounts. You might also need to apply for a bad credit loan if you need funding, because traditional loans might not be an option. Other consequences could include:

• Security deposit requirements for utilities
• Limited housing options as landlords screen applicants
• Higher insurance premiums
• Difficulty obtaining cell phone contracts
• Potential employment challenges in certain industries

Bad credit is not a life sentence. No credit check loans are also an option for people with bad credit, but beware of hidden fees that could increase your costs. There are better ways to boost your credit. We’ll get into that topic in more detail later.

Credit grades explained (A–F breakdown)

We’re barely halfway through this article, and we’ve already covered a lot. It can be overwhelming, so we’d like to simplify it by converting the credit score numerical ranges to traditional grades. Here’s what that looks like:

Grade A: 720+ (Excellent)

Excellent credit means you likely make payments on time, keep credit card balances low, and have a healthy mix of credit accounts. A-grade credit can help you get lower interest rates, higher approval odds, and better terms and conditions on debt accounts.

Grade B: 680–719 (Good)

B-grade credit is above average and still considered “good.” It means you might have a shorter credit history or sometimes carry higher balances on your credit cards. You can still qualify for most financial products, but perhaps not always at the best rates.

Grade C: 630–679 (Fair)

Fair credit means there’s room for improvement. It indicates you might have too much debt relative to your income, a few late payments, or maybe a collection account. Borrowing will be more expensive for you than it is for someone with A or B-grade credit.

Grade D: 550–629 (Poor)

Poor credit is a sign that your credit report has significant negative entries. You can dispute any errors, but the legitimate late payments and collections will only go away with time and better debt management. Credit offers will be there, but beware of predatory lenders.

Grade F: Below 550 (Very Poor)

Defaulted loans, bankruptcies, and multiple collections can lead to credit scores under 550. This is the “very poor” range where most financial products will be unavailable to you. That’s not a bad thing. Focus on paying off the debts that you owe, and your score will improve.

How do credit scores work?

Credit scores are calculated based on information in your credit reports from the three major bureaus: Experian, TransUnion, and Equifax. FICO scores weigh five key factors:

• Payment History (35%) - Your track record of paying bills on time
• Amounts Owed (30%) - How much debt you're carrying, especially on revolving accounts
• Length of Credit History (15%) - How long you've been using credit
• Credit Mix (10%) - The variety of credit accounts you manage
• New Credit (10%) - How frequently you're applying for new credit

VantageScore uses similar criteria but weighs them slightly differently. Both models care most about your payment history and how much debt you're carrying relative to your credit limits.

How are interest rates and credit scores related?

Borrowing costs are directly affected by credit scores. For instance, on a $300,000, 30-year fixed-rate mortgage, the difference between a 655 credit score and a 760 score could mean paying over $66,000 more in interest over the life of the loan. Credit card APRs can range from 16% to nearly 30% for individuals with bad credit.

Building credit from scratch or rebuilding poor credit

It’s never too late to start building or rebuilding your credit. Whether you’ve experienced financial hardship or simply mismanaged your finances, there’s a path to improving your credit. Here are a few suggestions that might help you:

For credit beginners:

• Apply for a secured credit card that reports to all three bureaus
• Use Experian Boost to get credit for utility and streaming service payments
• Become an authorized user on a responsible person's credit card

For credit rebuilders:

• Focus intensely on making all payments on time (set up automatic payments)
• Reduce revolving debt, especially credit card balances
• Address errors on your credit reports by disputing inaccuracies
• Don’t avoid the debt collectors. Negotiate whenever possible

How to improve your credit score

No matter where your score falls today, these steps can help you move up the credit ladder:

1. Check your credit report from all three bureaus at AnnualCreditReport.com. Look for errors and discrepancies between reports.
2. Dispute inaccuracies immediately. Common errors include accounts that aren't yours, incorrect balances, or paid collections still showing as open.
3. Pay bills on time, every time. This single factor has the biggest impact on your score. If you’re struggling to make payments, consider a debt consolidation loan to lower them.
4. Reduce credit card utilization to under 30% of your limit (under 10% is even better).
5. Avoid unnecessary hard inquiries by researching loan terms before formally applying. Pass on anything with a variable interest rate to make budgeting simpler.
6. Maintain old accounts to lengthen your credit history, even if you don't use them often.

Conclusion

Credit scores affect many areas of our lives, so it’s important to maintain and improve them wherever possible. If your credit score is low, don’t despair. There are steps you can take to improve it. Unlike the grades you received in school, credit scores can be improved if you’re willing to do the work. Pay your bills on time, manage your debt levels responsibly, and regularly monitor your credit reports. Over time, these habits will be reflected in your score.