We all know that our credit scores are important.  It can be the difference between a fast “approved” stamp on a mortgage application and “selling fish to tourists in t-shirts”.

But what is a good credit score?  Is there a magic number?

Sort of.

Here’s the deal.  Different creditors assess their lending habits in different ways.  While one bank might be willing to finance your new car purchase if your FICO rests at 620, another might advise you to move on to the next lot.  One home lender might offer the best possible rate if you’re at 700, another might reserve their best deals for those who are over the 740 mark.

In that sense, it’s tough to pin down what separates “okay” credit scores from the good ones.  There is a general agreement, however, that you’ll have access to credit at good rates if you can get your FICO to 720.

That’s the closes we can get to a magic number.  720.

A CBS report said that those who hit the 720 mark can relax about improving their numbers.  They stated, “The best number to have is 720 or above. If your score is 720, there’s really no need to try and raise it because lenders lump you in the same category as folks with a score of say 800 or 820.”  

BankRate.com reports that the people who come up with the FICO number, the Fair Isaac Corporation, claim that scores of 720 or better “will get you the most favorable interest rates on a mortgage.”

Others, however, argue that 720 isn’t quite good enough.  The Credit Karma blog argues that 720 “is above average credit”.  That falls in line with those who argue that it is possible to get even better rates if you can push your FICO score into the 750 range.  An article at Boston.com demonstrated that those who have 760+ scores do, generally, receive better credit deals than those in the 720 crowd.

Although there is undoubtedly some advantage to bumping up against the holy grail of 800, it seems safe to accept the 720 number as the dividing point between “good” and “not so good”.  If you have a FIC score of 720, you’re unlikely to be turned away from a loan request empty-handed or with a loan featuring a punishing interest rate.

All of this is couched in terms of the Fair Isaac FICO calculation, which is not the only credit scoring system in use.  Lenders don’t always rely on the FICO numbers and may use alternatives like Experians VantageScore.  FICO, however, is the standard-bearer of credit scores and should give you a good idea of where you sit in a general sense.

However, not all credit agencies access the same information and there are differences in interpretation.  Thus, you can’t assume that you’re going to get the credit you want simply because you make it to a 720 FICO.  Your numbers with other agencies might be considerably lower, and that could lead to problems.

That’s why everyone should take a look at their reports from all major agencies, looking carefully both for ways to boost their numbers and for errors and significant variations between reports.

NOTE:  Multiple sources point out that the average credit score in the United States is 723.  That’s right, the average is actually higher than what we usually think of as a good credit score!  Talk about grading on a curve, huh?  Considering the state of the economy and tightening credit, I wouldn’t be surprised to see the average drop while the idea of what constitutes a good number hops up.