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There are a variety of scoring models with varying numerical ranges, some for specialized purposes — but the credit score lenders are most likely to check, your FICO Score, ranges from 300 to 850. Another common model, your VantageScore, uses the same range.
However, only 1.6% of the U.S. scorable population had a perfect 850 score in 2019, according to FICO (the company behind the FICO Score credit scoring model). While some people may obsess over achieving credit score perfection, know that once your score is in the high 700s you’re as good as gold in the eyes of lenders.
- Credit score definition
- Why you need a good credit score
- Who has the highest credit score?
- Why an excellent credit score is good enough
- The lowest credit score
- How to increase your credit score
Credit score definition
Essentially, your score indicates to potential lenders how likely you are to pay back your debts. Even if you’ve never had a credit card, you can still have a credit score — for example, if you have student loans or a car loan, that’s enough to generate a credit score.
Here are the ranges your credit score may fall into, according to myFICO.com:
- Exceptional — 800 or higher
- Very good — 740 to 799
- Good — 670 to 739
- Fair — 580 to 669
- Poor — less than 580
If you’re brand-new to credit, be aware that it may take a while for your credit usage to generate a credit score. FICO requires that you have an account that’s at least six months old before you get a FICO Score, while VantageScore requires you to have an account that’s at least one month old.
Why you need a good credit score
Your credit score is considered in a multitude of situations, such as:
- When you apply for a credit card, auto loan or mortgage.
- When you fill out an apartment rental application form.
- When certain employers are evaluating your application for a job.
And when you’re approved for a credit product, a better credit score means you’ll generally qualify for better interest rates. For example, FICO estimates that a resident of the state of New York could get a $25,000, three-year loan for a new car at the following rates, depending on credit score range:
|FICO Score||APR||Monthly payment||Total interest paid|
Who has the highest credit score?
According to credit bureau Experian, just over 1% of consumers with a FICO Score have a perfect 850 score. And they’re not debt-free folks who don’t carry credit cards.
The bulk of people with perfect credit scores are baby boomers — 58%, according to Experian data. That’s unsurprising, considering that length of credit history is the third-most important factor in one’s credit score. But it’s still possible for younger consumers to break into the 850 credit score club, with 4% with perfect scores belonging to millennials.
Income isn’t considered in determining a person’s credit score. However, Experian data showed that the largest group of consumers with perfect credit scores (just over 21%) are in the $101,000 to $150,000 income range. By contrast, people making $25,000 or less were the smallest group, making up just over 8% of the total.
Here’s a breakdown of the credit score ranges of adults in the United States as of the last quarter of 2018, according to The Consumer Credit Card Market Report (published by the Consumer Financial Protection Bureau in August 2019):
- Superprime (scores of 720 or greater): 42% of the population
- Prime (scores from 660 to 719): 12% of the population
- Near-prime (scores from 620 to 659): 6% of the population
- Subprime (scores from 580 to 619): 6% of the population
- Deep subprime (scores of 579 or less): 13% of the population
In addition to those in those five credit score ranges, there are also consumers who have thin or stale score files, and those who are considered “credit invisible.”
Why an excellent credit score is good enough
If your credit score is between 800 and 850, FICO considers that an exceptional score. In fact, anything above 740 should qualify you for the best rates. And you shouldn’t fret if your score goes up or down a few points. It’s normal for credit scores to fluctuate over time — and because issuers report information to the credit bureaus every billing cycle, there’s a time lag between you taking an action and it being reflected in your credit score. According to the credit bureau TransUnion, your score likely contains some information from the last 30 to 60 days.
Even if you don’t have a perfect credit score, having excellent credit means you’re likely to get approved for some of the best credit cards available, as well as to receive lower rates when applying for financial products such as mortgages and auto loans.
The lowest credit score
The lowest credit score possible is obviously 300, which falls into the “deep subprime” credit score range. According to CFPB data, 13% of U.S. adults have deep subprime credit scores.
With a score that low, you’ll probably only qualify for subprime financial products and rates. You should be cautious about what you apply for in this case as many subprime credit cards are laden with fees that make carrying them quite expensive. One of the best ways to rebuild credit is to apply for a secured credit card, which requires a deposit — typically around $200.
How to increase your credit score
First, it’s good to know what your starting point is. There are ways to check your credit score for free, including My LendingTree and the Discover Credit Scorecard (which doesn’t require you to have a Discover credit card). Checking your score does not have any negative impact.
There are a few behaviors that can help improve your credit or maintain a good credit score. These include:
- Paying on time and in full every month. Payment history accounts for 35% of your credit score, so paying on time is the most important thing you can do to build a good score. Paying in full also helps your score by ensuring you don’t let your balance creep upward.
- Keeping your utilization low. Your utilization ratio comprises 30% of your credit score and measures how high your balance is compared to your credit limit. For example, if you have a credit limit of $1,000, and you have $500 in debt on that card, you’re at 50% utilization. It’s best to keep utilization at under 30%. In the example of a $1,000 credit limit, never put more than $300 on that card.
- Not applying for too much new credit. When you apply for a new credit card or loan product, it generates a hard inquiry on your credit report that dings your credit score by a few points and stays on your credit report for two years. New credit accounts for 10% of your credit score. Getting a new card also reduces your average age of accounts. For example, if you have one credit card that’s 5 years old, and you get a second card, that drops the average age of your accounts to 2.5 years old. Length of credit history accounts for 15% of your credit score.
- Having a varied mix of credit. Credit mix comprises 10% of your credit score, so having a variety of credit accounts (such as credit cards, student loans and a mortgage) is good for your score.
If you already have a good or very good credit score and you’re working to improve it, it’s likely you’re already on the road to success. You should continue the best practices, and after demonstrating responsible credit behavior, many issuers will allow you to request a credit limit increase on your card. A higher limit can improve your score because, if you keep your spending the same, your utilization ratio will go down.