Good Credit

Good Credit: What It Means and How It Works

What is good credit?

Good credit describes a credit history and score that indicate a borrower is a relatively low credit risk. Lenders use credit scores from reporting agencies—most commonly the FICO score—to evaluate applications for loans, credit cards, and other forms of credit.

Credit score ranges

Credit scores typically range from 300 to 850 and are grouped into tiers:
* Exceptional/excellent: 800 and above
* Very good: 740–799
* Good: 670–739
* Fair: 580–669
* Poor/very poor: 579 and below

A score of roughly 670 or higher is generally considered good and gives borrowers the best chance of approval and favorable loan terms. Lower-tier borrowers often face difficulty obtaining credit and pay higher interest rates (subprime loans).

How scores are calculated

Scoring models weigh several factors, including:
* Payment history (about 35%): on-time payments are crucial; delinquencies harm score and can remain on reports for years.
* Total credit utilization (about 30%): the ratio of outstanding balances to available credit—reducing balances improves this measure.
* Other factors: length of credit history, types of credit used, new credit accounts, and recent hard inquiries.

Practical steps to improve or maintain good credit

• Pay on time consistently — payment history is the largest single factor.
• Reduce outstanding balances to lower overall credit utilization.
• Consider requesting a higher credit limit to reduce utilization, but only if you will not increase spending; issuers may deny increases based on risk profile.
• Avoid opening many new accounts in a short time to limit hard inquiries and new-account risk.
• Be cautious about taking on unnecessary credit and monitor accounts for errors or unauthorized activity.

Why lenders care

Lenders use credit scores to determine eligibility and pricing. Borrowers with good scores (generally 670+) are more likely to receive approval and more favorable interest rates and terms than those with fair or poor credit.

Key takeaways

• Good credit means a relatively high credit score and lower perceived risk to lenders.
• A score of about 670 or higher is typically considered good.
• Payment history and credit utilization are the most influential factors.
• Improving credit focuses on timely payments, lowering balances, and prudent use of new credit.