What Constitutes a Good Credit Score?

Quick answer

• A good credit score is generally considered to be 700 or higher, though lenders have varying definitions.
• Scores between 670-739 are often categorized as “good.”
• Scores above 740 are typically considered “very good” to “excellent.”
• The primary goal is to achieve a score that qualifies you for the best loan terms and interest rates.
• Focus on consistent, responsible credit behavior rather than chasing a specific number.
• Improving your score takes time and a consistent approach to managing credit.

What to check first (before you act)

Credit report accuracy

Before making any changes, obtain copies of your credit reports from all three major bureaus: Equifax, Experian, and TransUnion. You can get them for free annually at AnnualCreditReport.com. Review each report meticulously for any errors, such as incorrect personal information, accounts you don’t recognize, or inaccurate payment statuses. Disputing errors is a crucial first step, as inaccuracies can unfairly drag down your score.

Utilization and balances

Your credit utilization ratio (CUR) is the amount of credit you’re using compared to your total available credit. High utilization is a significant negative factor. Check the balances on all your credit cards and other revolving credit accounts. Aim to keep your utilization low, ideally below 30% on each card and overall. Paying down balances is a direct way to improve this metric.

Payment history

This is the most critical factor influencing your credit score. Review your reports to ensure all payments are reported accurately as on time. Late payments, even by a few days, can have a substantial negative impact. If you find any errors in payment history, dispute them immediately.

Recent inquiries

When you apply for new credit, a hard inquiry is typically placed on your credit report. Too many recent inquiries can signal to lenders that you might be taking on too much debt, which can lower your score. While not as impactful as payment history or utilization, it’s worth noting if you have many recent applications.

Time horizon

Credit improvement is not an overnight process. Understand that it takes time to see significant changes. Factors like late payments can remain on your report for up to seven years, and their impact lessens over time. Focus on building a consistent track record of good credit habits.

Step-by-step (credit improvement workflow)

1. Obtain Your Credit Reports:

• What to do: Get your free reports from Equifax, Experian, and TransUnion at AnnualCreditReport.com.
• What “good” looks like: Clean reports with accurate personal information and no accounts you don’t recognize.
• Common mistake: Not checking all three reports.
• How to avoid it: Make a note to request all three reports annually.

2. Review for Errors:

• What to do: Carefully examine each report for inaccuracies (wrong addresses, incorrect balances, accounts that aren’t yours, wrong payment status).
• What “good” looks like: Reports that accurately reflect your financial activity.
• Common mistake: Skimming through the reports.
• How to avoid it: Go line by line, comparing account details to your own records.

3. Dispute Inaccuracies:

• What to do: If you find errors, dispute them with the credit bureau and the creditor that reported the information.
• What “good” looks like: Errors are removed from your reports, and your score potentially increases.
• Common mistake: Not providing sufficient documentation.
• How to avoid it: Gather any proof (statements, letters) to support your dispute.

4. Pay Down Credit Card Balances:

• What to do: Focus on reducing the amount you owe on credit cards and other revolving credit. Aim to get your credit utilization ratio below 30% (and ideally below 10%).
• What “good” looks like: Low balances relative to credit limits.
• Common mistake: Only paying the minimum.
• How to avoid it: Make more than the minimum payment whenever possible, prioritizing high-interest cards.

5. Make All Payments On Time:

• What to do: Ensure every bill, for every credit account, is paid by its due date.
• What “good” looks like: A payment history showing 100% on-time payments.
• Common mistake: Missing a payment by even a day.
• How to avoid it: Set up automatic payments or calendar reminders for due dates.

6. Avoid Closing Old Accounts (Usually):

• What to do: Keep older, well-managed credit accounts open, even if you don’t use them often.
• What “good” looks like: A longer average age of credit history.
• Common mistake: Closing accounts to reduce temptation or simplify.
• How to avoid it: Use old cards for small, recurring purchases (like a streaming service) and pay them off immediately.

7. Be Cautious with New Credit Applications:

• What to do: Only apply for credit when you truly need it. Avoid applying for multiple credit cards or loans in a short period.
• What “good” looks like: A limited number of recent hard inquiries.
• Common mistake: Applying for store credit cards just for a small discount.
• How to avoid it: Research which credit products you’re most likely to be approved for before applying.

8. Consider a Secured Credit Card (If Needed):

• What to do: If you have a limited or poor credit history, open a secured credit card, which requires a cash deposit as collateral.
• What “good” looks like: Responsible use of the secured card, with payments reported to bureaus.
• Common mistake: Treating a secured card as free money.
• How to avoid it: Use it for small purchases and pay it off in full each month, just like any other credit card.

9. Become an Authorized User (Carefully):

• What to do: Ask a trusted individual with excellent credit to add you as an authorized user on their account.
• What “good” looks like: The positive history of the primary account holder reflects on your report.
• Common mistake: Being added to an account with high balances or late payments.
• How to avoid it: Only agree to this if the primary account holder has a stellar credit history and low utilization.

10. Monitor Your Credit Regularly:

• What to do: Continue to check your credit reports and scores periodically.
• What “good” looks like: Staying informed about your credit health and catching potential issues early.
• Common mistake: Checking only when you need a loan.
• How to avoid it: Set a quarterly reminder to check your reports and scores.

What affects your score (plain language)

• Payment History: Did you pay your bills on time? This is the biggest factor. Late payments, even by a few days, can significantly lower your score.
• Amounts Owed (Credit Utilization): How much of your available credit are you using? Keeping balances low on credit cards is key. High utilization signals higher risk.
• Length of Credit History: How long have you been using credit? A longer history of responsible credit use is generally better.
• Credit Mix: Do you have different types of credit (e.g., credit cards, installment loans like mortgages or car loans)? A mix can show you can manage various credit products.
• New Credit: How often do you apply for new credit? Applying for many new accounts in a short period can temporarily lower your score.
• Public Records: Bankruptcies, judgments, and liens can severely damage your score.
• Age of Accounts: Older accounts generally have a more positive impact than newer ones, contributing to a longer credit history.
• Types of Credit Used: Using a variety of credit types (e.g., credit cards, mortgages, auto loans) responsibly can be beneficial.

What NOT to do while improving credit:

Avoid making impulse applications for credit, especially for small discounts at stores. Do not close old credit accounts unless absolutely necessary, as this can shorten your credit history and increase your utilization ratio. Never share your credit card or account login information with anyone.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Missing a credit card payment	Significant drop in credit score, late fees, potential account closure	Set up automatic payments or calendar reminders; pay at least the minimum by the due date.
Maxing out credit cards	High credit utilization ratio, signals financial distress, lowers score	Pay down balances aggressively; aim to keep utilization below 30% on each card and overall.
Closing old, unused credit cards	Shortens credit history length, increases overall utilization ratio, lowers score	Keep old accounts open, use them for small recurring charges and pay off immediately.
Applying for too much credit at once	Multiple hard inquiries, signals risk, can lower score temporarily	Only apply for credit when necessary; space out applications for new credit.
Not checking credit reports for errors	Inaccurate negative information remains, unfairly lowers score	Obtain free reports annually from AnnualCreditReport.com and dispute any inaccuracies promptly.
Co-signing a loan for someone who defaults	You become responsible for the debt; their missed payments hurt your credit	Only co-sign if you are fully prepared to pay the debt; understand the implications thoroughly.
Ignoring medical bills or small debts	Can be sent to collections, negatively impacting your score	Address all bills promptly; negotiate payment plans if needed; dispute if the debt is incorrect.
Not understanding credit utilization ratio	Keeping balances high, which negatively impacts your score	Monitor your balances relative to your credit limits; aim for below 30% utilization.
Assuming all credit scoring models are same	May not understand specific factors impacting your score	Research common scoring models (like FICO and VantageScore) to understand their key components.
Believing credit repair scams	Wasted money, no actual credit improvement, potential identity theft	Focus on legitimate credit-building activities; consult reputable financial advisors.

Decision rules (simple if/then)

• If your credit utilization is over 30%, then focus on paying down balances because high utilization significantly lowers your score.
• If you have missed a payment in the last 12 months, then prioritize making all future payments on time because payment history is the most critical factor.
• If you find an error on your credit report, then dispute it immediately because inaccurate negative information can unfairly harm your score.
• If you need to apply for a loan soon, then avoid applying for any new credit cards in the meantime because recent inquiries can temporarily reduce your score.
• If you have a limited credit history, then consider a secured credit card because it’s designed to help build credit responsibly.
• If you have multiple credit cards with high balances, then prioritize paying off the card with the highest interest rate first because this saves you money on interest over time.
• If you are an authorized user on someone else’s account, then ensure the primary account holder has excellent credit habits because their activity directly affects your report.
• If you are considering closing an old credit card, then reconsider unless it has a high annual fee because older accounts contribute positively to your credit history length.
• If you have a significant amount of debt across several cards, then consider a balance transfer to a lower-interest card if you can manage the fees and pay it down, because reducing interest costs helps you pay down principal faster.
• If you are unsure about managing your credit, then seek advice from a non-profit credit counseling agency because they can offer guidance without selling unnecessary services.
• If your credit score is below 670, then understand it’s considered “fair” and may limit your options, so focus on consistent positive actions to improve it.
• If your credit score is above 740, then continue your good habits to maintain excellent credit because this secures the best terms on future credit.

FAQ

What is considered a “good” credit score?

Generally, a score of 700 or higher is considered good. Scores from 670 to 739 are typically in the “good” range, while scores above 740 are considered “very good” to “excellent.” Lenders’ specific requirements can vary.

How long does it take to improve a credit score?

Significant improvement usually takes time, often several months to a year or more, depending on the issues you’re addressing. Positive habits, consistently applied, lead to gradual score increases.

Can I have a good credit score with only one credit card?

Yes, it’s possible to have a good credit score with just one well-managed credit card. The key is to use it responsibly, keep balances low, and always pay on time.

What is the biggest factor affecting my credit score?

Payment history is the most significant factor. Paying all your bills on time, every time, is crucial for building and maintaining a good credit score.

Should I pay off all my credit card debt at once?

While paying off debt is beneficial, if you have multiple cards, focus on reducing your credit utilization ratio first. Paying down balances to below 30% on each card can boost your score more quickly than paying off one card entirely while others remain maxed out.

What happens if I dispute an error and it’s not removed?

If your dispute is denied, the credit bureau will provide a reason. You can try to gather more evidence or consult with a consumer advocacy group. The original information will remain on your report if it’s deemed accurate.

Is it bad to have a lot of credit cards, even if I don’t use them?

Having multiple credit cards, even if not actively used, can be beneficial if they are old and well-managed, as they contribute to your credit history length and available credit. However, avoid opening too many new cards unnecessarily.

How often should I check my credit score?

It’s wise to check your credit reports at least once a year from each bureau. Many credit card companies and financial apps also offer free credit score monitoring, which can be checked more frequently.

What this page does NOT cover (and where to go next)

• Specific credit scoring models: While general factors are covered, the exact algorithms of FICO and VantageScore are complex and proprietary.
• Legal recourse for identity theft: This page focuses on credit improvement, not the legal steps required to address identity theft.
• How to get approved for specific loans: Eligibility for loans depends on many factors beyond just your credit score, including income and debt-to-income ratio.
• Investing strategies: This article is focused on credit health, not wealth-building through investments.

Where to go next:

• Learn about identity theft protection and recovery.
• Research different types of loans and their approval requirements.
• Explore strategies for debt management and budgeting.
• Understand how to build wealth and invest for the future.