What Makes a Good Credit Report Score?

The FICO standard scale ranges from 350 all the way to 850. So, you're probably wondering- what exactly is considered a 'good' credit report score? In this article we will demystify credit ratings and discover what level you should aim for to increase your borrowing power.

Establishing what constitutes a "good" credit score is pretty easy; matter of fact, it's a standard formula. Once upon a time, prospective lenders used to carefully examine credit reports, weigh the pros and cons, contrast this with income and make a decision that was far more 'organic' than it is today.

In the 1990's, Fair Issac made the process an entirely formulaic matter, which assigned values to various points of data that resulted in an overall "score". the exact formula used to create this score remains a highly guarded secret, but it is know to make use of a variety of factors. The "score" in question is called a FICO and it has massive impact on your ability to borrow, be it credit cards, car loans or mortgages.

The FICO standard scale starts at 350 and goes to 850. So, you're probably wondering- what exactly constitutes a 'good' credit score?

Here's how the scores typically break down.

730+ - Excellent credit
700 - 729 - Good credit
670 - 699 - Average Credit
585 - 669 - Higher risk
Below 585 - Very High Risk

Well, starting at 730, you're considered in the 'excellent' credit range. Here, you will receive the best interest rates for mortgages or loans, the lowest credit card fees and ultimately, will have access to more credit and borrowing power than people with a lesser score. If your score is above 730, don't worry. You've 'arrived' in the credit world and at this point, you can't really do any better. The functional difference between a 730 and a higher score is nominal, if not non existent.

If your score is in the 670 to 730, you will still be able to quality for credit lines, but you will pay a higher interest rate than those in the 'prime' credit range. Here, the actual score itself matters; the lower your score happens to be, the higher interest rate you will need to incur in order to borrow, so improvements in this range are worthwhile. For example, an increase as low as ten FICO points can save you thousands of dollars over the term of a 30 year mortgage.

If your score is below 670, you are in what's called the 'subprime' range where you will pay the highest rates with the least access to credit lines- if credit lines are extended to you in the first place.

People with scores below 670 should promptly start rectifying this, as the interest rates and limited access to credit suffered at these levels can have a substantial impact on your ability to borrow and as such, your overall financial life.