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What is a Good Credit Score for Any Age?

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If you’ve ever had any sort of credit account--whether a credit card, an automobile loan, or a mortgage, then you have both a credit report and a credit score. A good credit score makes it more likely that you’ll be able to borrow money at the lowest interest rates.

But what is a good credit score?

A credit score between 670 and 739 is good, scores between 740 and 799 are very good, and scores over 800 are exceptional under the scoring system used by the Fair Isaac Corporation (FICO), the primary credit scoring company in the US. Higher credit scores will lead to more favorable lending terms.

Read on for more about why credit scores are so important, how they’re calculated, and what you can do to improve yours.

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Why a Good Credit Score Is Important?

Having a good credit score is important because it’s the primary way lenders evaluate their degree of risk in lending you money. 

A higher score signals lower risk, meaning lenders will demand less from you in interest. This means lower monthly payments. Over the lifetime of, for example, a mortgage loan, a lower interest rate can mean tens of thousands of dollars in savings.

Cheaper borrowing terms aren’t the only advantage of a good credit rating. Many landlords and even some employers will check your credit as a way of assessing your overall reliability.

Having a solid credit report may make it easier to find a good apartment or even land a job.

How Credit Scores Are Calculated

While your FICO score is the credit score most commonly used by lenders (in more than 90% of lending decisions), it isn’t your only credit score. 

VantageScore, the second-leading credit scoring company, also calculates a score, as do the three credit reporting bureaus: 

  • Experian
  • TransUnion
  • Equifax

It’s common for your credit score to vary among the different companies since each has its own scoring range and uses its own formula.

No matter which company is doing the scoring, however, there are several factors that influence the final number, these are: 

  • Payment history. Your payment history is the most heavily weighted factor in your credit score. If you regularly miss payments or make them after the due date, it’ll negatively affect your credit score. Make sure to always pay on or before the due date.
  • Credit utilization. Credit utilization refers to the percentage of your available credit that you’re using. For example, if you have a credit card with a $5000 limit, and you owe $4,000, your credit utilization would be 80%. Lower credit utilization results in higher credit scores.
  • Age of credit accounts. The longer your history of responsibly using credit, the higher your score will be. Avoid closing old credit accounts, even if you no longer use them.
  • Account mix. Having several different types of accounts (for example, mortgage, auto, and credit card) will result in a higher credit score than having only one type of account.
  • Recent applications. Applying for new credit temporarily lowers your credit score, though it’s not a major factor in calculating your score. If you’re planning on seeking a home or auto loan and you’re concerned about your score, avoid opening new accounts in the months before applying for those loans.

Ways to Raise Your Credit Score

If your credit rating isn’t good enough to get you the terms you want, or if you’re being denied credit, there are several things you can do to raise your score.

These are: 

  • Make timely payments. If you have existing accounts, make it a priority to make all payments on time. 
  • Apply for a secured credit card. A secured credit card is a credit card linked to money deposited in a bank account. The credit limit is equal to the amount of the deposit. Using a secured card can help you build or repair your credit
  • Lower your credit utilization. If you can afford to pay off a credit card balance, do so. Paying your balance in full will lower your credit utilization and raise your credit score. 
  • Become an authorized user. If you can become an authorized user of a card belonging to someone with good credit, apply as their supplementary card holder. The primary cardholder’s credit score will help yours.

How to Monitor Your Credit

The whole system of credit reporting and credit scores can feel somewhat opaque. But there are ways to keep track of what the bureaus are doing and make sure their information is accurate.

One of the best ways to monitor your credit score is through CreditSesame. It’s a free service that allows you to check your score at any time. It also explains why your credit score is what it is and gives you tips on how to improve it. 

You’re also legally entitled to a copy of the credit statement or report from the three credit reporting departments annually, free of charge. You’re also entitled to a copy of your report if a lender denies you credit.

In both cases, however, you’ll only get the report itself for free. If you want to know your actual credit score, you’ll likely have to pay for it.

Even without the score, it’s worth reviewing your credit report annually to ensure that it’s accurate. The bureaus sometimes make mistakes, and they’re not likely to correct those mistakes unless you point them out. 

Additionally, monitoring your credit report is the best way to watch for signs of identity fraud and take corrective action. If you aren’t watching your reports and someone fraudulently opened credit accounts in your name, you may not find out until you attempt to get a loan and are denied.

You have the right to dispute any inaccurate information on your credit report by contacting the bureau that generated the report. They’ll review the request and contact you for more information.

Final Thoughts

Monitoring your credit score, like doing your taxes, paying bills, and saving for retirement, is one of the somewhat aggravating financial housekeeping tasks that come along with being a financially responsible adult. 

Just like the other three, failing to do it can have profound consequences for your wallet. If you maintain a good credit score, however, it can go a long way toward making financial life run smoothly--as well as saving you money.

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