Why do you need a good credit and how to get it.

What’s the difference between good credit and fair credit?

If you have a fair credit score, the distance between you and a good score could be as little as 1 point or as many as 90. It depends on whether your score lies on the low end or the high end of the fair credit spectrum (580-669 for FICO or 650-699 for VantageScore).

Regardless of the distance, being one level below good credit can make a huge difference when you apply for credit. You could miss out on access to great credit card offers on rewardscash back and 0% interest cards. You could also end up paying higher interest when you borrow money.

Consider this hypothetical example involving two credit card applicants and the APR (Annual Percentage Rate) they might pay depending on their credit scores.

FICO score

APR offer

Interest charges on $10,000 balance paid off in 2 years at $500 per month
Applicant 1

670 (Good)



Applicant 2

665 (Fair)



Source: Bankrate Credit Card Payoff Calculator

In this example, just a 5-point difference in your FICO score could cost you $399 over two years.

The difference doesn’t end at credit card APR. Paying a higher interest rate on long-term loans (a mortgage, student loan or car loan) can mean the difference of thousands of dollars over time.

The same principles apply to the difference between good credit and excellent credit, which FICO defines as any score over 800. People with excellent credit scores generally have the best shot at premier credit cards and low interest rates on everything from car loans to mortgages.

How to get a good credit score

If you have fair credit or poor credit, it may be easier to improve your credit score than you think. Follow these tips to get your credit score closer to good:

Check your credit report

Get a copy of your credit report so that you can check for errors or inaccuracies that show up. Some credit report errors can be as simple as a misspelled name or incorrect address, while others may involve outdated information (loans that you’ve paid off still listed as open, and so on). A good rule of thumb for anybody is to check your credit report at least once a year.

Correct any errors on your credit report

Disputing errors on your credit report involves two steps:

      1. Contacting the credit bureau or bureaus in question (such as Experian, TransUnion or Equifax)
      2. Contacting the person, company or organization that provided the information you believe to be inaccurate to the credit bureau

Uncertain about what to say? Don’t worry. The Federal Trade Commission (FTC) has sample letters for contacting credit bureaus and information providers.

You’ll need to provide documentation to address the errors, such as balance statements, receipts, etc. Be sure to send copies of your documents, not the originals.

Pay on time across the board

Pay all your bills on time, if at all possible. In addition to your credit card, your financial behavior with any other loan also plays a part. If you miss a mortgage payment or car payment, you’ll also do damage to your credit score.

Watch your credit utilization

Don’t carry a balance above 30% of your credit limit on any of your cards, although you’ll want to keep it as close to 0% as possible. Your credit utilization — how much of your available credit you’re using — is one of the key components in determining your credit score. Using more than 30% of your available credit could drive your score down.

Let an older card age gracefully

If you have an old credit card, think about keeping it instead of closing it out. VantageScore points out that an account held for a long period of time says “experienced credit user” to potential lenders.

Keep the account active by making a small charge (your monthly cloud storage, for example) and paying in full and on time each month.

An example of using a credit card to help your credit score

If you already have good credit but want to keep improving your credit score, many of the sound financial habits that have served you well so far will continue to be useful. The way you use credit cards can also make a difference.

Consider the Wells Fargo Cash Wise Visa card, our good-credit pick for digital wallet users. Making payments on time benefits your credit score, but cards like the Cash Wise Visa also have the potential to help you reduce debts on other credit accounts.

The Cash Wise Visa offers a 0% introductory APR on qualifying balance transfers for 15 months (14.49%-24.99% variable APR thereafter). You could transfer a balance to the Cash Wise Visa from a different credit account and have 15 months to pay off the balance interest-free (before the offer expires and the card’s regular APR takes effect).

To potential lenders, having high credit utilization across multiple accounts could make you seem like a risky borrower. Consolidating debt with a balance transfer is a possible remedy that might help you take your credit score from good to excellent.

The information about the Wells Fargo Cash Wise Visa® card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.

UltraFICO, Experian Boost may be good news for good credit

New credit-scoring models launched in 2019 aim to benefit consumers who have good credit habits even if their traditional credit profiles are lacking.

Credit bureau Experian now offers UltraFICO™ and Experian Boost, which expand the criteria used to evaluate creditworthiness. Credit bureaus have traditionally focused on five indicators: payment history, length of credit history, amounts owed, credit mix and new credit. These new products supplement that information by adding deposit accounts to the mix — checking, savings and money markets — and considering factors including:

      • How long the accounts have been open
      • The accounts’ level of activity
      • Amounts in savings accounts
      • Mobile wallet transactions such as PayPal and Venmo

Experian Boost goes a step further by factoring in payments for utility and cellphone service as well.

UltraFICO and Experian Boost are designed to open doors to people whose credit activity doesn’t line up with traditional scoring methods. “Thin-file” consumers who’ve never taken out a car loan or a mortgage, for example, tend to come up short under the prevailing definitions of credit history.

If consumers in those groups have positive histories with their checking and savings accounts, the new systems can partially compensate for shortfalls in traditional credit score criteria. They can also help those working to rebuild their credit after suffering a financial setback.

“I think it’s too soon to tell the overall impact, since they’re only been in the marketplace a few months,” says Bruce McClary, vice president of marketing for the National Foundation for Credit Counseling (NFCC). “But the potential is significant.”

Things to consider before you apply

Any time you apply for a loan or credit line, from mortgages to credit cards, the lender will request a copy of your credit history from one or more of the 3 major credit bureaus. It’s part of how lenders separate qualified candidates for credit from applicants who may be more of a risk.

This request is called a hard inquiry or “hard pull.” It can lower your credit score, but usually the effect is temporary. “Soft pulls” involve the kind of credit checks that don’t require your consent, such as pre-approved credit card offers, and they don’t affect your credit score.

The lesson here is to limit the number of times you apply for credit, triggering a hard inquiry that can cause a short-term dip in your credit score.

Exceptions apply in some cases. If you’re “rate-shopping” for a student loan, car loan or mortgage, for instance, FICO treats multiple hard inquiries within the same 45-day period as a single inquiry.

However, the rate-shopping exception doesn’t mean your credit score will escape unscathed if you submit applications for multiple types of credit in a short window — say, a mortgage and a car loan in the same week.