What constitutes a good credit score, how score ranges affect your options, and the real-world cost difference.
- A credit score is a number between 300 and 850 that represents your creditworthiness.
- The difference between a good and poor credit score translates directly into money: lower interest rates, better insurance premiums, and easier approvals.
- Score Ranges Scores of 800 to 850 are exceptional: you qualify for the best rates on everything.
A credit score is a number between 300 and 850 that represents your creditworthiness. The difference between a good and poor credit score translates directly into money: lower interest rates, better insurance premiums, and easier approvals.
Score Ranges
Scores of 800 to 850 are exceptional: you qualify for the best rates on everything. Scores of 740 to 799 are very good: excellent rates on virtually all products. Scores of 670 to 739 are good: competitive rates on most products. Scores of 580 to 669 are fair: higher interest rates and occasional denials. Scores below 580 are poor: credit is difficult and expensive to obtain.
The Real-World Cost
On a $300,000 30-year mortgage, the rate difference between a 760 and 620 score can be 1.5% or more. At 6.5% versus 8.0%, the monthly payment difference is approximately $300, and total interest over the loan life differs by more than $100,000. Credit cards show similar patterns: a 16% APR versus 26% APR on a $5,000 carried balance costs an additional $500 per year.
Beyond Lending
Landlords check credit scores for rental applications. Auto and home insurance companies use credit-based scores to set premiums. Some employers check credit reports for positions involving financial responsibility. A good credit score opens doors beyond just borrowing.
The Target Score
For most practical purposes, a score of 740 or above qualifies you for the best rates on products that matter most. The difference between 740 and 850 is minimal in terms of real-world benefits. Below 740, improvement effort is worthwhile. Above 740, further improvement is nice but not urgent.
Credit scores are one of many factors lenders consider. Individual results vary. See our financial disclaimer for important disclosures.
A worked example
Consider Maria, who started with a 620 credit score. She paid off her two credit cards down to under 10% utilization and set up autopay on all bills. Six months later her score was 695. Twelve months in: 745. When she refinanced her mortgage at 745, the rate quote was 0.625% lower than at 620 - on her $320,000 loan, that's about $42,000 in interest saved over 30 years.
Common mistakes to avoid
- Closing your oldest credit card 'to simplify.' That instantly reduces your total available credit (raising utilization) and eventually reduces average account age. Both hurt your score.
- Maxing out one card even if you pay it off. Card issuers report balance at statement close. Hit 80%+ utilization on one card and your score drops 50+ points until the next statement, even if you pay in full.
- Applying for multiple cards in a short window. Each hard inquiry takes 5-10 points off temporarily and signals to lenders that you may be desperate for credit.
Frequently asked questions
How long does it take to raise a credit score?
Most people see meaningful movement in 60-90 days once they stop the behaviors that hurt the score - high utilization, late payments, recent applications. Big jumps (100+ points) typically take 6-12 months of consistent on-time payments and low utilization. Negative items (collections, late payments) age out of your report after 7 years.
What is the most important factor in a credit score?
Payment history is 35% of your FICO score - the single biggest factor. Credit utilization (the percentage of available credit you're using) is 30%. Length of credit history is 15%. Credit mix and new credit each account for 10%.
Does checking your own credit hurt your score?
No. Checking your own credit through services like Credit Karma, your bank, or directly with the bureaus is a 'soft inquiry' and has zero effect on your score. Only 'hard inquiries' from lenders during credit applications affect your score, and even those drop off after 12 months.
What credit score do I need for a mortgage?
Most lenders want 620+ for a conventional mortgage and 580+ for an FHA loan. But 740+ unlocks the best rates - on a $400,000 mortgage, that can save you $40,000+ over the life of the loan compared to a 660 score. Aim for 740+ before applying if you can.
Should I close old credit cards?
Usually no. Closing a card reduces your total available credit (raising utilization) and eventually reduces the average age of your accounts. Both hurt your score. The exception is cards with annual fees that you're not using - then it's a math question between the annual fee and the temporary score impact.
Where this guide fits in
This article is part of the Chase The Dollar editorial library of practical money guides. We update guides as rules and rates change. If you spot a mistake or want us to cover a topic, the contact form is the fastest way to reach us.