It is widely accepted that a good FICO credit score can be defined as anything between 680 and 720. This score is generated based on an individual's financial records from the last seven years. Older financial records may be included under some circumstances, depending on the nature of the record and the reason behind a credit check.
Credit scores that fall into this range denote a relatively low risk in terms of loan decisions, and financial institutions normally give borrowers at this level very good interest rates. Delinquency is considered rare for borrowers in this range, occurring roughly 5 percent of the time. This is reassuring for most banks, making them more comfortable with lending larger sums of money in the form of signature loans. Further, a credit score between 680 and 740 makes it easier to obtain financing for larger purchases, such as vehicles and real property. This includes home loans and business loans.
In simple terms, a FICO score allows lenders and other organizations to quickly and easily categorize an individual, making it easier to set objective policies that take into account a simple number. This minimizes the occurrence of subjective banking practices as the FICO score boils an entire borrower's history down into an easily understood 3-digit number.