Credit scores are a key factor in determining not only your ability to borrow money, but they can be a factor in your ability to qualify for contract bonds.
Your credit score falls into one of five categories, ranging from poor to excellent. Let’s break down these levels and what they mean for you.
What Are the Five Levels of Credit Scores?
Credit scores typically range from 300 to 850, and they are categorized into five distinct levels that reflect your creditworthiness. These levels are based on FICO scoring models, which are commonly used by lenders across the United States.
- Poor (300–579)
This is the lowest credit score range, and borrowers in this category often struggle to qualify for loans or credit cards. If approved, they typically face very high interest rates or need to offer collateral. Credit scores in this range can be the result of missed payments, high credit utilization, or accounts in collections. Improving a poor credit score may require a combination of paying down debt and making timely payments over time.
Source: Experian – Understanding Credit Scores - Fair (580–669)
A fair credit score is considered “subprime,” meaning that while you may be able to qualify for loans, the interest rates are usually higher. Borrowers in this category are often viewed as higher risk by lenders. People with fair credit may need to work on building up their credit to access better loan terms and lower rates.
Source: FICO – Credit Score Ranges - Good (670–739)
A good credit score indicates a reliable borrower. Most lenders consider individuals with scores in this range as acceptable or lower-risk borrowers. People in this category are more likely to qualify for standard loan products, often at competitive interest rates. According to FICO, this range encompasses the majority of American borrowers.
Source: FICO Average Credit Score - Very Good (740–799)
Borrowers with very good credit scores are seen as low-risk by lenders. These individuals generally have access to a wide variety of financial products and benefit from lower interest rates. Lenders are more likely to offer favorable terms, and credit applications are usually approved with ease.
Source: MyFICO – Credit Score Tiers - Excellent (800–850)
An excellent credit score is the highest possible range and reflects a borrower who has consistently demonstrated exceptional financial responsibility. People in this category are often offered the best interest rates, loan products, and credit card rewards. They are seen as the least risky.
Source: FICO Credit Rating
Why Are Credit Scores Important?
Your credit score is a measure of your financial health and plays a critical role in your ability to qualify for a bond. Higher credit scores generally translate to better bond terms and lower premium rates, while lower scores can make it more difficult or expensive to access bonds.
In 2023, the average FICO score in the U.S. was 715, meaning most Americans fall into the “good” range. Having a score above 670 generally means you’re considered a reliable borrower. Conversely, a score below 580 can make it difficult to get approved for new credit.
Source: Experian 2024 Credit Insights
How Can You Improve Your Credit Score?
Improving your credit score requires a proactive approach. Here are some strategies to help boost your score:
- Pay Bills on Time
Payment history is the most significant factor affecting your credit score. Make sure you pay all your bills on time, as late payments can have a major negative impact on your score. - Reduce Your Credit Card Balances
Lowering your credit utilization ratio by paying down credit card debt can quickly improve your score. Aim to use less than 30% of your available credit. - Avoid Opening New Credit Accounts
Each new credit inquiry can temporarily lower your score. Only apply for credit when necessary and try to keep existing accounts open to maintain a longer credit history. - Monitor Your Credit Report
Regularly check your credit report for errors that could be dragging down your score. You can request a free credit report from major credit bureaus like Equifax, Experian, and TransUnion once per year.
Source: TransUnion – How to Improve Credit
Who Benefits from Higher Credit Scores?
Borrowers with higher credit scores enjoy numerous benefits, such as:
- Lower Premium Rates: A higher score means lower risk, so lenders offer better interest rates, saving borrowers money on loans and mortgages.
- Access to Better Bond Capacity: The Surety looks favorably on the contractor who maintains high FICO scores.
- Increased Loan Approval Chances: Lenders are more likely to approve loan applications from borrowers with good to excellent credit scores.
Source: NerdWallet – Benefits of Good Credit
Where Can You Check Your Credit Score?
Several financial institutions and online services provide access to your credit score. Many credit card companies offer free credit score tracking for their customers. Additionally, services like Experian, Equifax, and TransUnion allow individuals to view their credit reports and scores.
Source: Equifax – Credit Score Access
Conclusion
Understanding the five levels of credit scores helps you take control of your financial future. Whether you’re aiming to improve a poor score or maintain an excellent one, knowing where you stand is the first step. By managing your finances responsibly and monitoring your credit, you can ensure that you are well-positioned for the best financial opportunities.
Sources and further reading
- Experian – Understanding Credit Scores
- FICO – Credit Score Ranges
- FICO Average Credit Score
- MyFICO – Credit Score Tiers
- FICO Credit Rating
- TransUnion – How to Improve Credit
- NerdWallet – Benefits of Good Credit
- Equifax – Credit Score Access
Credit Scores in 2025: Day to day Impact
Credit scores still sit at the center of many everyday decisions. In 2025, lenders, insurers, landlords, and some employers continue to rely on credit data to gauge reliability and risk. Knowing how your score is used—and how to protect it—can lower costs and reduce friction when you apply for financing, insurance, housing, or certain jobs.
Where your score matters right now
- Loans & cards: Better scores unlock lower interest rates and higher credit limits. National averages entering 2025 remained around the mid-710s, with state averages ranging from the high 600s to the mid-740s.
- Insurance pricing: In many states, insurers use credit-based insurance scores alongside other factors to price auto and homeowners’ policies. Rules vary by state; some limit or restrict this practice.
- Housing: Property managers commonly check credit during tenant screening, which can affect approvals and deposits.
- Employment (select roles): Some employers review credit reports (not scores) for positions with financial or security responsibilities—only with your written permission and subject to federal and state rules.
- Utilities & phones: Strong credit can reduce or eliminate security deposits when opening new accounts.
Quick wins vs. common myths
| Do this | Why it helps | Myth to ignore |
|---|---|---|
| Pay every bill on time | Payment history is a major score factor; even one 30-day late can sting | “Checking my own credit hurts my score.” (It doesn’t—soft inquiries don’t affect scores.) |
| Lower revolving utilization | Lower balances relative to limits support higher scores; there’s no magic 30% line—less is better | “Carrying a balance boosts scores.” (Paying in full is best.) |
| Keep older accounts open | Longer average age of accounts generally helps | “Closing old cards improves scores.” (It can shorten history and raise utilization.) |
How this shows up for homeowners, renters, and small contractors
- Homeowners: Higher scores can mean lower mortgage rates and, in many states, better homeowners insurance pricing when credit-based insurance scores are allowed.
- Renters: A stronger file can reduce deposits and speed up approvals; consider adding positive rent data if your provider offers it.
- Contractors seeking bonds: Clean credit files and low revolving balances can support higher bond capacity and more favorable terms.
Stay in control: monitoring and disputes
You can review each of your three credit reports weekly at no cost and dispute any inaccuracies online. Monitoring reports helps catch identity-theft issues early and keeps your file clean ahead of major applications.
Current landscape, at a glance
| Topic | What to know (2025) |
|---|---|
| Average score | U.S. average hovered near 715 going into 2025; Minnesota near the top, Mississippi near the bottom |
| Insurance use of credit | Many states allow credit-based insurance scores; state rules differ, and some restrict or prioritize other rating factors |
| Soft vs. hard checks | Soft checks (like self-reviews and prequalifications) don’t affect scores; hard inquiries can cause a small, temporary dip |
| Free reports | You have permanent access to free weekly reports from Equifax, Experian, and TransUnion |
Sources and Further Reading
-
- Experian — What Is the Average Credit Score in the U.S.? (Aug 8, 2025)
- NAIC — Credit-Based Insurance Scores: How insurers use credit information
- CFPB — Does requesting my credit report hurt my credit score?
- CFPB — What is a credit inquiry? (soft vs. hard checks)
- CFPB — What do employers see in employment credit checks?
- FTC — Permanent access to free weekly credit reports
- myFICO — Credit utilization: why lower is better (no hard 30% rule)
- California Dept. of Insurance — Proposition 103 overview of primary auto rating factors
Richard Ford
