Your credit score is important, and knowing your credit score can be a good indicator of whether or not you’re making responsible financial decisions or maybe headed down the wrong path. But there are a lot of factors that make up your credit score, and lenders are interested in specifics when it comes to approving a loan.
But if you try to look up what specific numbers lenders are looking for, your search will likely yield a bunch of vague hypotheticals. So let’s take a look at some actual numbers and ranges that have proven to be good indicators of a financially responsible individual, based on FICO’s report of High Credit Scorers, and Capital One’s credit monitoring tool CreditWise, which uses TransUnion credit report data.
Payment history
Your ability to make payments on time is crucial, and accounts for 35 percent of your credit score. But will a late payment here or there hurt? Here is the breakdown of how your percentage of payments made on time look to lenders:
- 0-1% is below average, meaning you are almost always late. Approximately 12 percent of individuals fall in this category.
- 2-59% is average, and 17 percent of individuals fall in this category.
- 6-89% is good, and 9 percent of individuals fall in this category.
- 90-100% is excellent, and 61 percent of individuals fall in this category.
Credit utilization
Lenders want to know you live within your means and don’t rely on borrowed money to live, which is why credit utilization accounts for 30 percent of your credit score. This is calculated by comparing how much total credit is available to you, and how much of that you use. Here are the ranges for credit utilization ratio:
- Below average is more than a 60 percent utilization ratio, with 20 percent of individuals in this range.
- Average is a 30-59 percent utilization ratio, and 15 percent of individuals are here.
- Good is a 10-29 percent utilization ratio, and 20 percent of individuals fall in this category.
- Excellent is less than 10 percent utilization ratio, and 45 percent of individuals are here.
Age of oldest account
Time is the best witness of your financial responsibility, so the length of your credit history makes up 15 percent of your credit score. Here are the ranges for what the age of your oldest account look like to lenders:
- Below average is less than 2 years old, with 5 percent of individuals in this category.
- The average age of oldest accounts is 2-7 years, with 18 percent of individuals in this category.
- Good is considered 8-25 years, with 56 percent of people in this category.
- Excellent is more than 25 years,with 21 percent of people in this category.
The lesson to learn here is to keep your oldest account open, and only apply for new credit sparingly and as-needed.
New accounts
Opening new accounts can be seen negatively, especially if you’ve opened several in a short period of time. This category accounts for 10 percent of your credit score, and here is the breakdown on your credit report:
- Opening more than 6 accounts in 2 years is below average, with 4 percent of individuals in this category.
- Opening 5-6 accounts in 2 years is considered average, with 6 percent of individuals in this category.
- Opening 3-4 accounts in 2 years is good, and 15 percent of people fall in this category.
- Having opened less than 3 accounts in 2 years is excellent, and 76 percent of people fall in this category.
Number of recent inquiries
Hard inquiries mean you’ve applied for some type of financing that affects your credit, but soft inquiries are from those trying to sell you a product or service and do not show up on your credit report.
- Having 5+ hard inquiries in the past 2 years is below average, and 10 percent of people are in this category.
- 3-5 hard inquiries in 2 years is average, and 17 percent of people are in this category.
- 1-2 hard inquiries is good, and 31 percent of people are in this category.
- Having no hard inquiries in 2 years is excellent, and 42 percent of people are in this category.
Total Available Credit
Similar to credit utilization ratio, how much credit you have available shows that you’re responsible, and have been deemed responsible by other lenders who have approved you for a large amount of credit.
- Below $2,500 is below average and 28 percent of people are in this category.
- $2,500-$15,000 is considered average, and 28 percent of people are in this category.
- $15,000-$50,000 is considered good, and 32 percent of people are in this category.
- Having more than $50,000 is considered excellent, and 12 percent of people are in this category.
It’s also important to know that your credit mix, or the various kinds of credit lines and loans you have, makes up 10 percent of your credit score.
For more credit resources and education, check out our tips and tricks section.
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