If you plan to apply for credit, such as a new credit card or a loan to finance a car or home, it’s a good idea to take a look at your credit reports and credit scores to see how lenders may view you as a potential borrower. But how do you know how your score stacks up? If your score is 700 or higher and you wonder whether that’s a good score, the answer is yes.
Exactly how good depends on several factors. First of all, no one has just one credit score: There are dozens of credit scoring products available to lenders, and all calculate your credit score differently. Most perform statistical analysis on the contents of credit reports—records of your history of borrowing and repaying money, compiled by the three national credit reporting companies (Equifax, Experian, and TransUnion).
The most widespread credit scoring systems, or models—the FICO Score and VantageScore—generate three-digit scores on a scale of 300 to 850, with higher scores indicating greater creditworthiness. (Other scoring models use different scale ranges, but higher scores are always better.)
A FICO Score of 700 is not the same as a VantageScore of 700; in fact, a 700 generated by FICO Score 10, the most recent FICO Score model, isn’t exactly the same as a 700 produced by FICO Score 8, an earlier model still used by many lenders.
Nevertheless, on any model using the score range of 300 to 850, a score of 700 is generally considered good.
How good is a 700 credit score?
Experian offers the following descriptions of different scores by range and scoring model:
FICO Scores are characterized as follows :
- 300 to 579: Poor
- 580 to 669: Fair
- 670 to 739: Good
- 740 to 799: Very Good
- 800 to 850: Exceptional
VantageScore scores are characterized in this way:
- 300 to 499: Very Poor
- 500 to 600: Poor
- 601 to 660: Fair
- 661 to 780: Good
- 781 to 850: Excellent
If you don’t know where your credit stands, you can access your Experian credit report and a FICO Score based on it for free using Experian CreditWorks.
The Benefits of a 700 Credit Score
Credit scores can affect many areas of your life—not only finances but transportation, housing, and employment as well. A good score in the 700 range can make all these things a little easier, and save you money to boot.
Lenders use credit scores to evaluate how much of a financial risk you may pose. You earn a high credit score by demonstrating you can manage debt wisely. Paying your bills on time, keeping credit card balances reasonably low, and avoiding unnecessary debt all contribute to score improvement. So does time: A longer track record of good credit handling will tend to bring higher scores than a shorter one.
Lenders view higher credit scores as indicating you’re likely to pay back any money they lend you on time. As a result, they typically charge borrowers with good scores lower interest rates than they do those with fair scores, and they typically offer their very best rates only to those with very good or exceptional scores. Lenders also typically offer borrowers with higher scores larger loan amounts or credit-card borrowing limits than they do applicants with lower scores.
If you have a poor credit score, lenders may be concerned you won’t pay back your loan on time (or at all), so they may charge you a higher interest rate, demand an extra high down payment—or refuse to lend to you at all.
Credit scores don’t just influence your ability to borrow money. In addition to lenders, certain other types of businesses are legally entitled to check your credit when deciding to do business with you:
Landlords and property managers can use credit scores when screening potential tenants, and a low score could rule you out as a potential renter, or mean you’ll pay an extra large security deposit.
Auto insurers in many states use specialized credit scores to help set policy premiums, so a higher credit score can mean you’ll pay less for your car insurance.
Property insurance companies may perform credit checks as well, to gauge your likelihood of paying your premiums on time and to forecast your likelihood of filing loss claims. Higher scores correlate with lower likelihood of filing claims so, here again, a higher score can mean lower insurance costs.
Many employers also perform credit checks when evaluating job applicants. They do not receive credit scores, but they can review a version of your credit report for signs of financial distress that might portray you as a fraud risk. If you have a low credit score, your credit report wouldn’t necessarily raise a red flag with employers, but if your score is around 700 or better, you probably don’t have any major negative events such as recent foreclosures or bankruptcies that could be sources of concern.
Get Your Credit Score to 700 or Higher
If your credit score is below 700, it doesn’t have to stay that way. You can work to improve your credit scores, and a great first step is understanding the behaviors that influence all credit scores. Different scoring models may give greater weight to some than to others, but all credit scoring models consider the following factors when predicting the likelihood you’ll pay future debts:
- Payment history. Paying your bills on time is the single most important habit you can adopt if you want to improve your credit score, and going more than 30 days late on a debt payment has a major negative impact on credit scores. Roughly 35% of your FICO Score is based on your payment history, and VantageScore considers it “moderately influential.”
- Credit utilization. Utilization rate—a credit card’s outstanding balance expressed as a percentage of its borrowing limit—plays a major role in credit score calculations. Everyone knows it’s a bad idea to “max out” a card, or bring utilization to 100%, but experts recommend keeping utilization below 30% to avoid hurting your credit scores, and people with the highest scores keep utilization below 10%. Utilization accounts for about 30% of your FICO Score, and VantageScore treats it as “extremely influential.”
- Age of accounts. The longer your track record of timely payments and sound debt management, the higher your credit scores will tend to be. You can’t speed up this process, but you can mess it up if you miss payments or make other missteps. Age of accounts contributes about 15% of your FICO Score, while VantageScore considers it “less influential.”
- Diversity of your accounts. Lenders like to see evidence that you can handle a variety of credit types, and more than one loan or credit card at the same time. Account diversity, or credit mix is a measure of that capacity. It accounts for about 10% of your FICO Score, but VantageScore considers it “highly influential.”
- Credit inquiries. Credit checks related to new applications for credit appear on your credit report as inquiries. Because new debt is statistically tied to a greater risk of repaying all your loans, they tend to impact your credit scores negatively. Scores typically recover within a few months as long as you keep up with your bills, but if you take on too many new loans or credit card accounts in a short period of time, the effect can be deeper and longer-lasting. The FICO Score and VantageScore are both designed to encourage “rate shopping”—applying to multiple lenders to get the best possible deal on a car loan or mortgage, for example. The scoring models treat multiple applications for similar loans as a single event as long as they take place within a few weeks of one another, so they don’t do cumulative harm to your scores. Inquiries account for about 10% of your FICO Score, and VantageScore rates it as “less influential.”
- Collections and public records. Severe negative entries, including bankruptcies, foreclosures, and debts sold to collections agencies can remain on your credit reports, with a negative impact on your credit scores, for seven to 10 years.
To improve your credit score:
- Make sure to pay all of your bills on time each month, even if you’re only making the minimum required payments.
- Use no more than 30% of your available credit, and ideally less than 10%.
- Diversify your accounts, especially if the only open accounts you have are credit card accounts.
- Apply for new credit only when you really need it.
- If you have any delinquent accounts or debts in collections, work out agreements to bring them current as soon as possible.
- Monitor your credit reports regularly to ensure no inaccurate information is included that brings down your credit score.
- Consider signing up for Experian Boost™, a free program to add new, positive information to your credit report.
