What Is a Good Credit Score and Why It Matters
The difference between a 680 and 740 credit score can cost you $50,000 over a mortgage. Here's what scores actually mean and why the numbers matter more than you think.
By CashSmartGuide Editorial Team - Last updated: January 2026 | 8 min read
Everyone knows higher credit scores are better, but most people don't realize how dramatic the difference actually is between "good" and "excellent" credit. A 720 score might feel good enough, but bumping it to 760 can save you thousands of dollars on a single loan.
Credit score ranges aren't arbitrary—they represent specific risk tiers that lenders use to determine whether you get approved and what interest rate you pay. Understanding these tiers helps you set realistic improvement goals and know when you've reached levels that unlock meaningful financial benefits.
This guide breaks down what qualifies as a good credit score, what each tier actually gets you in the real world, and why improving your score matters far more than most people realize. The numbers aren't just bragging rights—they're the difference between financial freedom and paying extra for everything.
The Quick Answer
A "good" credit score is typically 670-739 on the FICO scale, but "very good" (740-799) and "exceptional" (800-850) unlock significantly better rates and terms. For mortgages, the sweet spot is 740+, which qualifies you for the best interest rates. For most purposes, a score of 750 or higher gives you access to top-tier financial products with minimal friction. Anything below 670 is considered "fair" or "poor" and results in higher costs, more denials, and limited options.
Credit Score Ranges Explained
FICO scores range from 300 to 850, divided into five categories. Here's what each range actually means for your financial life.
300-579: Poor
High RiskThis range indicates serious credit problems—bankruptcies, collections, charge-offs, or consistent late payments. Most mainstream lenders will deny applications. You'll be limited to secured credit cards, very high-interest loans, or predatory lenders.
Real-world impact:
- • Denied for most credit cards and loans
- • Apartment rentals extremely difficult or impossible
- • Large utility deposits required ($200-500 per service)
- • Auto loans at 18-25% APR if approved at all
- • Forced to use secured products requiring deposits
580-669: Fair
Below AverageThis is subprime territory. You can get approved for credit, but you'll pay significantly higher interest rates than people with better scores. Lenders see you as higher risk and price accordingly.
Real-world impact:
- • Credit cards with 20-28% APR and low limits
- • Auto loans at 12-18% APR
- • Mortgage rates 1-2% higher than prime rates
- • Higher insurance premiums (10-20% more)
- • Rental applications require extra documentation or co-signers
670-739: Good
Above AverageThis is where most Americans fall—about 21% of people have scores in this range. You'll get approved for most credit products, but you won't qualify for the absolute best rates. There's still room for improvement that translates to real savings.
Real-world impact:
- • Most credit cards approved with 15-20% APR
- • Auto loans at 6-10% APR
- • Mortgage approval likely but not at lowest rates
- • Standard insurance rates (not penalized, not rewarded)
- • Rental applications generally approved without issues
740-799: Very Good
Well Above AverageThis is the sweet spot where you qualify for excellent rates and terms. About 25% of Americans have scores in this range. Most lenders consider you a preferred customer and compete for your business.
Real-world impact:
- • Premium credit cards with rewards and low APRs (12-16%)
- • Auto loans at 4-6% APR
- • Mortgage rates at or near the best available
- • Lower insurance premiums (5-15% savings)
- • Pre-approved for most financial products
- • Higher credit limits offered automatically
800-850: Exceptional
ExcellentElite credit. Only about 20% of Americans have scores in this range. You've demonstrated years of perfect credit management. However, the practical benefits over a 760 score are minimal—once you're above 740, you've already unlocked the best rates.
Real-world impact:
- • Same rates as 760+ (minimal additional benefit)
- • Instant approval for virtually everything
- • Maximum credit limits and best card rewards
- • Psychological satisfaction of elite status
- • Demonstrates exceptional financial discipline
The Magic Number: 740
For most financial products, 740 is the threshold for best pricing. Going from 739 to 740 can save thousands on a mortgage. Going from 800 to 850 saves essentially nothing. Focus on getting above 740, then maintaining it.
So What Actually Counts as "Good"?
The technical answer is 670+, but the practical answer depends on what you're trying to accomplish.
For General Approval: 670+
Anything above 670 gets you approved for most standard credit products. You won't get the best rates, but you're in the game. Banks will work with you, and you can access mainstream financial services without major obstacles.
For Better Rates: 700+
Breaking 700 puts you solidly in "good" territory where interest rates start to drop noticeably. The difference between 680 and 720 can be 0.5-1% on major loans, which adds up to significant savings over time.
For Best Rates: 740+
This is the goal. Once you hit 740, you qualify for the best rates lenders offer. Going higher helps slightly, but the biggest jump in benefits happens when you cross the 740 threshold.
For Peace of Mind: 750+
At 750+, you have breathing room. Small negative events (like a hard inquiry or slight utilization increase) won't drop you out of the top tier. You're comfortably in excellent territory with margin for error.
The Real Dollar Impact of Your Score
Abstract score ranges mean nothing until you see what they cost in actual money. Here's how different scores affect what you pay.
$300,000 30-Year Mortgage
Credit Score: 620-639
8.5% APR
Monthly Payment
$2,307
Total Interest Paid: $530,592
Total Cost: $830,592
Credit Score: 660-679
7.5% APR
Monthly Payment
$2,098
Total Interest Paid: $455,280
Total Cost: $755,280
Credit Score: 700-719
6.8% APR
Monthly Payment
$1,956
Total Interest Paid: $404,160
Total Cost: $704,160
Credit Score: 760+
6.3% APR
Monthly Payment
$1,861
Total Interest Paid: $369,960
Total Cost: $669,960
The Bottom Line:
Difference between 620 and 760 credit score: $160,632 in extra interest paid
Difference between 700 and 760 credit score: $34,200 in extra interest paid
Even improving from "good" to "very good" saves enough to buy a car.
$30,000 Auto Loan (5 years)
$10,000 Credit Card Balance
Beyond Interest Rates: Other Benefits of Good Credit
Lower interest rates are obvious, but good credit affects areas of your life you might not expect.
Housing Options
Landlords run credit checks before approving rentals. Good credit means faster approval, lower deposits, and access to better properties. Bad credit can mean outright denial or requiring a co-signer even if you make good income.
In competitive rental markets, landlords choose tenants with better credit when multiple applicants want the same property.
Insurance Costs
Most states allow insurers to use credit-based insurance scores for auto and home insurance pricing. People with good credit pay 10-30% less for the same coverage as those with poor credit.
Over 10 years, this can add up to $3,000-$5,000 in savings just on auto insurance.
Employment Opportunities
Employers in finance, government, healthcare, and positions requiring security clearance often check credit reports. They can't see your score, but they see your payment history. Major negative marks can disqualify you from certain jobs.
Poor credit won't affect most jobs, but it can limit career options in specific industries.
Utility and Phone Service
Electric, gas, water, internet, and cell phone companies check credit before activating service. Poor credit means security deposits of $100-$300 per service that tie up your cash for months or years.
Good credit means no deposits—you keep your money and start service immediately.
Business Financing
Starting a business usually requires personal credit checks for loans, credit lines, and vendor accounts. Good personal credit gives you access to capital. Poor credit makes entrepreneurship nearly impossible without significant cash reserves.
Many business owners are surprised to learn their personal credit affects their business funding options.
Credit Card Rewards and Benefits
The best rewards credit cards—the ones with travel perks, cash back, and signup bonuses worth $500+—require excellent credit for approval. Poor credit limits you to cards with annual fees and minimal rewards.
Over a lifetime, this difference in rewards can amount to $10,000+ in lost benefits.
Financial Stress and Mental Health
Good credit provides peace of mind. You know you can handle emergencies, qualify for loans if needed, and won't face denials or humiliating deposit requirements. The psychological benefit of financial security matters more than any interest rate.
How Does Your Score Compare?
Understanding where you stand compared to other Americans provides context for your credit journey.
Average FICO Score by Age
Credit scores generally improve with age as people build longer credit histories and pay down debt. The national average is approximately 715.
What These Averages Mean
If you're in your 30s with a 720 score, you're above average for your age group. If you're 55 with a 650 score, there's significant room for improvement. However, these are just averages—what matters more is whether your score qualifies you for the financial products you need at rates you can afford.
Don't obsess over beating the average. Focus on crossing the thresholds that actually matter: 670 for basic approval, 700 for better rates, and 740 for best rates. Everything else is just numbers.
How to Reach a Good Credit Score
If your score isn't where you want it, these actions will get you there. No shortcuts exist, but consistent behavior works.
1. Pay Everything On Time, Always
Payment history is 35% of your score. Set up autopay for minimums on everything. A single 30-day late payment can drop your score by 50-100 points and stay on your report for 7 years. Never miss payments.
2. Reduce Credit Card Balances Below 30%
Credit utilization is 30% of your score. Keep balances below 30% of your limit, ideally below 10%. If you have a $5,000 limit, keep balances under $1,500 (preferably under $500). Pay down high balances aggressively.
3. Keep Old Accounts Open
Length of credit history is 15% of your score. Don't close old credit cards even if you don't use them. The age of your oldest account and average account age both matter. Use old cards occasionally to keep them active.
4. Limit New Credit Applications
Each hard inquiry drops your score by 2-5 points temporarily. Multiple applications in short time frames signal financial stress. Only apply for credit you actually need, and space applications at least 6 months apart when possible.
5. Dispute Errors on Your Report
Check your credit reports annually at AnnualCreditReport.com. Dispute any errors—incorrect late payments, accounts that aren't yours, wrong balances. About 20% of credit reports contain errors that hurt scores.
For comprehensive strategies to accelerate improvement, read: How to Improve Your Credit Score Faster (Legally). And for realistic timelines, see: How Long Does It Take to Build a Good Credit Score?
Mistakes That Keep Scores From Improving
Obsessing Over Perfection
Chasing an 850 score is pointless—you get the same rates at 760 as you do at 850. Focus on crossing 740 and maintaining it, not maxing out the scale. The difference between 780 and 820 means nothing in practice.
Closing Old Credit Cards
This reduces your available credit (increasing utilization) and can lower your average account age. Keep old cards open and charge something small occasionally to prevent closure from inactivity.
Carrying Balances to "Build Credit"
This myth costs people thousands in interest. You don't need to carry balances or pay interest to build credit. Charge something, pay the statement balance in full monthly. That's all it takes.
Ignoring Collections
Hoping they'll go away won't work. Collections devastate scores and stay on your report for 7 years. Deal with them—negotiate payment, dispute if invalid, or wait them out strategically. Ignoring them just extends the damage.
Applying for Credit to "Diversify"
Credit mix is only 10% of your score. Never take out loans just to improve your mix. The hard inquiry and new account hurt more than the mix helps. Let credit mix develop naturally over time.
Many harmful credit myths persist despite being completely false. For a complete debunking, see: Credit Score Myths That Can Hurt Your Finances
Context Matters: When "Good" Isn't Good Enough
A 700 score is objectively good, but whether it's good enough depends on your goals.
Buying a House Soon?
If you're planning to buy a house in the next year, push for 740+ before applying. The difference in mortgage rates between 700 and 740 can save you tens of thousands over the loan life. Wait a few months to improve your score if you're close.
Financing a Car?
Auto loan rates tier at different levels than mortgages. Generally, 660+ gets you approved, but 720+ gets you significantly better rates. If you can wait 6 months to improve from 680 to 720, you'll save thousands on the loan.
Applying for Apartments?
Most landlords just want to see you're not a disaster—scores above 650 usually work. In competitive markets, higher is better, but you don't need perfection. Focus on having no major negative marks rather than chasing a specific number.
Just Starting Out?
If you're building credit from scratch, getting to 670 should be your first goal. That crosses you into "good" territory where most financial products become accessible. From there, work toward 700, then 740 over time.
The Bottom Line
A "good" credit score is technically 670-739, but the practical threshold for best financial outcomes is 740. This is where you qualify for top-tier interest rates on mortgages, auto loans, and credit cards. Going higher helps slightly, but the biggest benefits come from crossing 670, then 700, then 740.
The difference between a 650 and 760 score isn't just abstract numbers—it's $100,000+ in interest paid over a lifetime. Good credit saves you money on every financial product you'll ever use, from housing to insurance to phone service. It also opens doors to better jobs, easier rentals, and financial opportunities that poor credit simply can't access.
Building and maintaining good credit requires consistent behavior over years: pay everything on time, keep credit utilization low, maintain old accounts, and avoid unnecessary applications. There are no shortcuts, but the payoff is worth the discipline.
If your score isn't where you want it, focus on crossing the next threshold rather than achieving perfection. Getting from 640 to 680 unlocks more benefits than getting from 780 to 820. Set realistic goals, practice good credit habits consistently, and let time do the rest. The magic number to aim for is 740—once you're there, you've won the credit game.
Continue Learning About Credit
Credit Information Disclaimer
This article provides general information about credit scores and their financial impact. Interest rates, loan terms, and credit score ranges can vary by lender, geographic location, and individual circumstances. The examples provided are illustrative and actual rates may differ. This content should not be considered personalized financial advice. Credit scoring models and lender requirements change over time. For specific guidance about your credit situation or loan applications, consult with qualified financial advisors, mortgage professionals, or credit counseling services. Individual results vary based on credit history, income, debt levels, and many other factors.