Credit is one of those topics that you hear about everywhere, but many people don’t have detailed knowledge about it. You might know the general concept of a credit score, but how do you know if your score is good? How high can a credit score go?

Fortunately, these are some of the few credit-related questions with simple, straightforward answers.

How High Can a Credit Score Go?

Not to confuse you, but you actually have many different credit scores. Some credit scores are geared toward specific parts of your credit history like housing or credit cards.

The one you should pay attention to above all the others is your FICO 8 score. The FICO 8 is the most widely-used credit score and it’s the one that will impact you the most.

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  Our take:Online marketplace to find you a personal loan offer that matches your needsAPPLY NOWCredit ScoreLoan Size/AmountLoan TermAPROrigination FeeAll can apply$100 – $15,0001 – 605.99% – 35.99%Varies by lender

FICO 8 scores range from 300 to 850, so 850 is the highest they can go.

Keep in mind, however, that almost no one has a score at or near 850. In fact, only 20.7% of Americans have scores over 800.

Does that mean the majority of Americans have bad credit? Not necessarily. It’s important to understand what scores are considered to be good or bad, though.

What is a Good Credit Score?

When you apply for a loan or other financial product, they all have their own standards. An SAT score of 1400 would be considered to be fantastic at most schools, but Ivy League schools might consider it too low for admission. Credit scores are similar.

In most cases, though, people agree on some guidelines for which scores are considered “good.”

A score of 800 or more is “exceptional.” Scores between 740 and 799 are “very good.” If your score is between 670 and 739, it’s considered to be “good.” A “fair” score is any score that falls between 580 and 669, and anything under 580 is “poor.”

• BONSAI FINANCE

  Our take:Online marketplace to find you a personal loan offer that matches your needsAPPLY NOWCredit ScoreLoan Size/AmountLoan TermAPROrigination FeeAll can apply$100 – $15,0001 – 605.99% – 35.99%Varies by lender

Why Does My Credit Score Matter?

Now that you understand how to interpret your credit score, why does it matter? Will your credit score affect your daily life?

Yes, actually, it will. There are many ways your credit score comes into play, even when you aren’t doing something that’s obviously credit-dependent like getting a mortgage.

More Financial Freedom

There are so many reasons in life that you may want or need financing. This could arise any time you need a new car, or even if you need a loan to repair your current car. If your washer and dryer die and you don’t have the cash to replace them, financing can make it happen.

The higher your credit score is, the less likely you are to be denied for any financing you need. You’ll get the freedom to make your own choices with your financial life, rather than having your credit score limit your options.

On top of getting approved in the first place, you may also receive higher credit limits and loan offers if your credit score is strong. Companies are comfortable loaning you more money because your credit score shows them that you’re low-risk.

Lower Interest Costs

Let’s say your credit score is high enough that you could get approved for most types of financing. That doesn’t mean it won’t help you to raise it more.

In many cases, when you apply for financing, the lender chooses your interest rate based on your credit score. That means a better credit score can put more cash in your pocket, plain and simple.

For example, let’s say you borrow $200,000 to buy a house. If you land a 30-year fixed loan with a 5% interest rate, you’ll pay a total of $186,000 in interest. If your interest rate for the same loan is 8%, your total interest will be a massive $328,000.

That means a lower credit score would cost you $142,000.

More Security When Applying for Housing

Some people believe that if they aren’t planning to buy a house, their credit score isn’t a big deal. That isn’t true.

Whether or not you realize it, most landlords and leasing agents will run a credit check before they choose to approve you for a rental home. This tells them how well you handle your money, which affects how confident they feel that you’ll continue to pay the rent.

Some landlords even determine your security deposit based on your credit score. In that way, your credit score could throw an unexpected wrench in your plans by raising your move-in costs.

Fewer Hurdles for Getting a Job

This is a newer trend that is arising, but it’s affecting more and more people. Some employers are choosing to check candidates’ credit scores before offering them a job.

Their theory is that a person’s credit score gives them insight into how responsible the person is. While there haven’t been studies that show a concrete connection between job performance and credit, employers want all the information they can get about a person.

In this way, a poor credit score can even affect your ability to get the job you need in order to pay down your debt and improve your credit. It’s a harsh cycle but it’s true.

Lower Insurance Rates

This surprises many people as well. Did you know auto insurance companies check your credit score?

According to car insurance providers, drivers with poor credit scores tend to file more claims than those with good credit scores. As a result, they charge higher premiums to drivers with lower credit scores.

As with employers, this can feel frustrating. Many people who have poor credit are in that situation because of financial struggles at one time or another. The best way to improve your score is often to pay down your debt, but that’s harder to do if you’re paying more for auto insurance.

Getting a Handle on Your Credit Score

When it comes to improving your credit score, the first step is to educate yourself.

How high can a credit score go? Is my score high enough to get me where I want to go? Answering these questions will put you one step ahead on the road to better credit and more financial freedom.

If you want to begin building your credit, start by applying for credit cards for people with no credit and work your way up.