Planning to buy a house?

A good credit score can help you get approved for attractive rates when you apply for a mortgage. But determining whether a particular credit score is good or not can be tricky.

That’s because the threshold for what’s considered good can vary depending on the lender and the type of loan you’re applying for. Throw into the mix different lenders using different scoring models, and the whole credit score thing only becomes complicated.

Which brings us to the question: What’s a good credit score?

There’s no definitive answer to this question because the three main credit reporting agencies—Equifax, Experian, and TransUnion—all score consumers differently.

But we’ll give you valuable insights into what lenders consider a good credit score using data from the two commonly used credit scoring models—FICO and VantageScore. Let’s dive in!

What Is a Credit Score?

A credit score is a three-digit number that reflects the likelihood that a consumer will fulfill his payment obligations. Simply put, a credit score is a number between 300 – 850 that depicts a person’s creditworthiness.

Your credit score is one of the critical indicators of your financial health.

It tells lenders how responsibly you use credit. The better your score, the easier you’ll find it to be approved for higher loan amounts.

What Is a Credit Scoring Model?

A credit scoring model is a statistical analysis used by credit bureaus to evaluate your creditworthiness.

Scoring models perform sophisticated analysis on the contents of your credit report as recorded by the three credit bureaus.

These models will look for patterns related to your loans and payment history, then assign a score based on the prevalence (or absence) of these patterns. Scoring calculations are based on many factors, including the amount of debt, frequency of payments, credit charge-offs, etc.

Scores generally range from 300 (the lowest) to 850 (the highest).

The most common credit scoring models are FICO and VantageScore. However, it’s also possible for a lender to use their own scoring systems.

FICO Scoring Model

FICO is an abbreviation for the Fair Isaac Corporation, the first company to offer credit scoring services. The classic FICO model uses a scoring range of 300 to 850.

However, some industry-specific FICO models use a different scale.

For instance, FICO Auto scores range from 250-900 and have several versions. A score above 750 is considered excellent. A FICO score under 600 is considered poor. In between is considered fair to above average.

VantageScore Model

Although FICO scores are the most popular among mortgage lenders, the VantageScore credit scores have also gained traction over time.

This model was introduced in 2006 when the three major credit bureaus—Equifax, Experian, and TransUnion—decided to offer FICO some competition in the credit scoring business. And just like FICO, the VantageScore model uses a 300 to 850 credit score range.

How Is Credit Score Calculated?

The specific calculations FICO and VantageScore use to calculate credit scores are trade secrets, but both models use data derived from your credit report.

Generally, data about your debt and payment history is compiled and used to calculate your credit score. Here are the key factors that FICO considers, ranked in order of importance.

• Payment history (35% of your FICO Score): Whether you have paid previous bills and debts on time
• Balances Owed (30%): The total amount of loans you’ve borrowed compared to your total credit limit, also known as your utilization rate
• Length of credit history (15%): The length of time you’ve been using credit
• New Credit (10%): How often do you apply for loans and/or open new accounts
• Credit Mix (10%): The variety of loan types you have, including mortgage, credit cards, installment loans, etc.

Recent account activity can also affect your final credit score calculation. That said, it’s best to avoid opening too many credit accounts in a short period.

Credit Score Ranges

Credit score ranges vary based on the credit score model used (FICO vs. VantageScore) and the credit bureau that pulls the score. Below you can check what credit score range you fall into, using estimates from Experian.

FICO Score

• Excellent: 800 - 850
• Very good: 740 - 799
• Good: 670 - 739
• Fair: 580 - 669
• Very poor: 300 – 579

VantageScore

• Excellent: 781 - 850
• Good: 661 - 780
• Fair: 601 - 660   
• Poor: 500 - 600
• Very poor: 300 – 499

Despite the differences in both models, credit scores largely depend on how well you use and maintain credit over time. If you practice good credit habits, your score will reflect it, no matter the scoring model used.

What Is a Good Credit Score for a Mortgage?

According to Experian, a credit score of 620 is often the minimum score you need to rent an apartment, and this falls into the “fair credit range” of both FICO and VantageScore models.

But if you’re buying a house, you’ll need a good to excellent credit score to secure the best deals. Depending on the credit model used, a good credit score for a mortgage will fall between the following ranges:

• FICO: 670 – 739
• VantageScore: 661 – 780

If your credit score is above 700, it’s likely your mortgage application will be easier, and you’ll be able to negotiate favorable terms.

What If My Credit Is Not The Best?

Don't worry. If your credit is not the best and could use a little help, don't let that discourage you. This is where a caring, experienced and well-resourced Loan Advisor comes in. Please reach out one of our seasoned, dedicated Loan Officers at one of our locations near you and let us help you through the process.