What Is a Good Credit Score? Plus Everything Else to Know About Credit

While many have either heard of or know about credit scores, it’s not a fun subject to tackle for many — leading some to avoid checking their credit scores altogether. A Javelin Strategy and Research study commissioned by TransUnion suggest that more than half of Americans check their credit monthly. This is great news, but other surveys published in recent years indicate a population of Americans that don't know about credit scores.

It’s important to build your credit score and regularly check your credit score to be in good standing. You can qualify for credit cards with valuable rewards and favorable loans when buying a home or car by performing these quality checks.

A credit score is a “report card” of your financial history, including your ability to pay debts such as credit cards, car loans, mortgages and any other financial obligations. Your credit score becomes your record that financial institutions use to determine your eligibility for credit lines, home loans and more.

In addition, your credit score can be taken into account when applying for an apartment, when you’re considered for employment and applying for a new bank account.

Each credit reporting agency calculates and reports your credit score slightly differently. However, there are several core components of having a solid credit score across the board.

As an example, these are the core factors taken into consideration to calculate your credit score for FICO:

This is only one example of one credit reporting agency. While they all slightly differ, they all look at similar data. If one of your scores is excellent, your other scores are likely in good shape.

There are slight differences in credit score, credit report and credit history. Each term revolves around evaluating your creditworthiness but using different approaches.

Because credit scores can be somewhat complicated, many myths have surfaced on how to increase your credit score. Credit report myths such as holding a balance on a credit card or having multiple credit cards on your credit report are not true.

The only tried-and-true way to build your credit is always to pay your debts on time and keep your debt as close to zero as possible.

Here are a few of the most common misconceptions about credit scores and debunking reasons.

Your credit score is your financial report card that lenders, credit card companies and landlords use to judge how responsible you are regarding paying your debts back. While this score is calculated through many data points, there can sometimes be flaws and mistakes in the reporting that go into the score. A study from Consumer Reports found that one-third of Americans have errors in their reports.

And while you may not need your credit score information daily, it's important to monitor your credit score, so it's up to snuff when needed. Many financial institutions offer free credit monitoring as part of their services, and it only takes a minute or two to sign up.

If you have a credit card, your servicer likely provides a free credit monitoring platform.

Large credit card issuers like Chase, American Express and Discover all offer credit monitoring to their respective customers.

If you aren’t sure where to find this, take a look inside your customer portal, or give customer service a call.

Sources: American Express, Bank of America, Credit Wise, Chase

You may also consider using a credit monitoring service to analyze your credit score. These services are helpful as they can help pair you with home lenders, auto loans, home insurance brokers and identify monitoring tools to help you along your credit score journey.

• Chase Credit Journey: Chase Bank provides this service for free, regardless if you’re a current customer or not. You will be able to get your VantageScore for free, and begin to understand what data is influencing your credit score — both positive and negative.
• Experian Boost: This service, offered by one of the three major credit scoring bureaus, helps consumers count miscellaneous monthly bills toward their credit score such as cell phone bills and streaming services.
• CreditKarma: Known as one of the original tech services to give consumers insight into their credit score, CreditKarma has a full platform of services to help consumers improve their credit history.

You can pull your credit score from three credit bureaus. You can contact Transunion, Equifax or Experian for your score, and they will be able to give you a full breakdown of why your score is where it is.

Here’s how to contact each one:

• Equifax: You can request a free credit score and report.
• Experian: You can get your a FICO credit report via the website.
• TransUnion: You can get your TransUnion credit report.

If you need additional assistance, especially if your credit is less than perfect, you may consider consulting with a nonprofit credit counselor. These counselors can help you settle your debt with creditors and get you on a payment plan that works best for you.

However, know that these counselors tend to come with fees and can hurt your credit score.

According to Experian, a score of 670-739 is considered a good credit score. This scoring category falls directly in the middle, as the order is: poor, fair, good, very good and excellent.

Having good credit implies that you have demonstrated an ability to pay your debts back, with maybe a blemish or two in the past. However, you may find yourself with less than favorable product options.

For example, you may not be able to be approved for some of the best travel credit cards. However, you should be able to be approved for mid-tier credit cards that still earn decent rewards.

Credit scores are not all calculated equally, and the two methodologies are FICO and VantageScore. They are similar as they both aim to do one thing: predict the likelihood that someone will fall into delinquency in the next 24 months.

However, the way they each go about measuring their scores is different.

FICO scores are made up of five factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). All of these numbers are considered when calculating your given score from 300-850.

VantageScore is compromised of scores from all three major credit bureaus: Experian, Equifax and TransUnion.

According to Experian, a FICO score of 670-739 is considered a good credit score. However, remember that your FICO score is measured differently than VantageScore and can vary between the three credit bureaus, although the variance is likely slight.

Here are the credit score ranges according to FICO:

According to Experian, a VantageScore of 700-749 is considered a good credit score. However, remember that this score can vary between credit reporting agencies as they all have different data sets.

Here are the credit score ranges for VantageScore:

However, there are no "hard barriers" between scores. For example, if you have a 696 VantageScore, it's not guaranteed that you will have a much different outcome than someone with a 703 score. Credit issuers look at scores and where you live, income and other variables.

Your credit score is vital because this is the financial metric that creditors, employers, landlords and other financial institutions will use to judge how large of a lending risk you are.

A high credit score will give you options to shop around for the best credit card, qualify for the best interest rates for loans and simplify your financial life.

A lower credit score will give you fewer options, including credit cards, loans, housing, and even potentially bank accounts, making it even more difficult to build wealth.

Many agencies and organizations value your credit score. Here are a few of the larger groups that will care:

Having a good or excellent credit score opens up many options for the best financial products. Whether it's a solid rewards credit card, a low fixed-rate credit score, a low rate on an auto loan or even better housing options — a solid credit score is necessary. However, it takes time to build a good credit score, especially for students. It can take months, or even years, to accumulate enough on-time payments and positive marks to swing your credit in a positive direction.

Generally, here’s what you can expect with good or excellent credit:

If you're looking for resources to help jumpstart your personal finance journey, particularly improving your credit score, there are many places to start. Pull what's beneficial to you from MoneyGeek's compiled list of websites and tools to help you get started with your journey to improving your credit score.

• Consumer Finance Protection Bureau: This is the government agency responsible for implementing and enforcing Federal laws around consumer financial products. You can find resources if you are in a difficult situation with a lender.
• Federal Deposit Insurance Corporation: This Federal agency was designed by Congress to maintain stability and confidence from the public in the financial system. They also have resources for consumers trying to be better with their money.
• Y4Y (You for Youth): You for Youth is a government-funded group with the mission of supporting young people with resources for a better future. But regardless of age, you may find this resource helpful.
• National Endowment for Financial Education: This non-profit organization is dedicated to giving all people more resources to gain financial literacy.
• New York Public Library: Whether you are a member of the NYPL or not, there are many resources available. Whether you’re interested in investing, paying for college, real estate or building your credit score, there are resource guides that outline the basics.
• Financial Literacy and Education Commission: The FLEC is an arm of the U.S. Treasury Department in charge of building MyMoney.gov, a resource for educators and consumers to have more tools to manage their budgets.
• Notre Dame Personal Finance Resources: Notre Dame has a wealth of resources on their website, not only for its students.
• America Saves: This is a great resource for those who aim to save more money each month. Founded by the Consumer Federation of America, it seeks to help Americans save more, reduce debt and build wealth.