A credit score of above 700 is frequently considered good and may allow a borrower to receive a lower interest rate. On the other hand, those over 800 are easily considered excellent.
Credit cards have been more on-demand since the global pandemic began. Due to travel and other restrictions placed for most areas, people find convenience in purchasing and making transactions as well as payments online.
However, while there are measures imposed almost everywhere, doing personal inquiries with your credit card issuer has been quite difficult.
Luckily, these days, everything can be done with the help of the internet. So, if you’re trying to figure out whether your credit score is just right, we’ll help you out.
Understanding Credit Scores
Getting credit cards could always mean a huge adjustment. Especially if it’s your first time getting one. There are things you will have to familiarize to be able to smooth sail with your account and avoid small to big errors. Credit scores are one of them.
It is a number between 300 and 850, indicating a consumer’s creditworthiness. This is used by financial institutions- a model made by FICO. It is the one lending companies use to help them determine how likely it is they will be repaid on time if they grant a borrower a credit card or loan.
FICO score is based on a person’s credit record, which includes the number of open accounts, total levels of debt, repayment history, and many other factors. It can be noted as an essential part of one’s financial status. The higher your FICO score are the more chances of qualifying for your demands.
People with FICO score below 640 are normally called subprime borrowers. These are individuals who are considered showing a higher risk to lenders.
Lending institutions often charge interest on subprime mortgages at a rate higher than a conventional mortgage to compensate themselves for carrying more risk. They may also require a shorter repayment term or a co-signer for borrowers with a low credit score.
(There are many different types of credit scores: FICO Scores and scores by VantageScore are two of the most common types of credit scores, but even industry-specific scores exist.)
Credit Score Basics
This figure displays US-based statistics.
To weigh from a different perspective, here is how each range differs– from its rating, the percentage of people being able to reach such, and the impact it has once obtained. This is a simple guide you can check when monitoring your credit score depending on the demands you want to meet.
|Credit Score||Rating||% of people||Impact|
|300-579||Very Poor||16%||Credit applicants may be forced to pay a fee or deposit, and applicants with this kind of rating may not be approved for credit at all.|
|580-669||Fair||17%||Applicants with scores in this range are considered to be subprime borrowers.|
|670-739||Good||21%||Only 8% of applicants in this score range are possible to become seriously delinquent in the future.|
|740-799||Very Good||25%||Applicants with scores ranging here are expected to receive better than average rates from lenders.|
|800-850||Outstanding||21%||Applicants with scores in this range are instantly at the top of the list for the best rates from banks.|
Applicants with credit scores in this range are instantly at the top of the list for the best rates from banks.
How Credit Scores Are Calculated?
There are three major credit bureaus that keep track of credit and save consumers’ credit records. While there may be discrepancies in the data gathered by the agencies, there are factors evaluated when computing a credit score.
It can be your payment history, revolving credit, your debt, or the total amount you owed with your account, the duration of your credit history, types of account, and how often you apply for new credit.
Frequently, your credit report and credit scores evolve. Because of this, it is not possible to measure the exact impact of a single factor in how your FICO Score is computed without looking over the entirety of your report.
Factors That May Influence Your Credit Scores
To thoroughly keep track of your credit scores, consider how credit scores major factors.
- It’s noted a payment history counts for at least 35% of a credit score and reveals whether a customer pays their obligations promptly. According to FICO, past long-term behavior is used to forecast future long-term behavior. It keeps track of both revolving loans, like credit cards, and installment loans, such as mortgages Thus, one of the most ideal ways to improve your credit score as a whole is by making consistent, timely payments.
- The total amount owed counts for 30% and takes into account the percentage of credit available to a person that is currently being used. This is called credit utilization. It is measured individually by card and also across multiple cards. This also makes up almost two-thirds of your score, so avoid carrying big balances to keep a good credit scoring.
- The duration of credit history scores for 15%, with longer credit histories being deemed less risky because more information is available to check their records. Remember that it’s unlikely to have a good record if you’re new to credit. Rest assured, it doesn’t necessarily take long to achieve a high score.
- The type of credit used is said to count for 10% of a credit score. It suggests whether one has a mix of installment credit, from mortgage loans to revolving credits. While this is a vague category, experts indicate repaying a variety of debt products indicates the borrower can handle all kinds of credit;
- On the other hand, a new credit sums for 10%, and it factors in the number of new accounts a person has, the accounts they have recently applied for- which result in further credit inquiries, and when the most recent account was opened.
- Meanwhile, records such as bankruptcies or civil judgments may also affect your record and history. Negative information on your record immediately lowers your credit scores. These, particularly, are the ones you should be aware of.
What A 700 Credit Score Can Get You
As we have raised earlier, the higher your scores are the better. This suggests that a credit score of 700 instantly guarantees you into the “good” credit range.
Here is where you can get cheaper rates on more financial products, such as broader deals with all sorts of loans. Because lenders consider people with scores like yours as solid business prospects, most banks would be willing to extend credit with good credit holders.
Note that a 700 credit score will also be good enough to purchase a house. You can find lenders who will consider you for higher value homes requiring jumbo mortgages.
It is understood that the good credit range begins at 690. This may help you get an unsecured credit card with a decent interest rates or balance-transfer card. A car loan and an emergency fund can also be offered. Meanwhile, an excellent credit score (720 and above) can immediately get you the bigger deals at the best rates.
How To Strengthen Or Improve Your Credit Score
As usual, sustenance is the key. It has always been iterated that being a responsible cardholder will lead you to bigger and long-term opportunities. With hopes, you can achieve that. Begin with paying your bills prior to the due time. We recommend:
1. Setting Up Automatic Payments
Assuming you’re prone to overspending- despite successfully reaching a good credit score, we will let you rethink this. However, this is one of the easiest and ideal ways of keeping your scores above average.
This process allows banks or lenders to pull out money from your account so you won’t have to worry about failing to meet your deadline. Through this, you will not only save time but also money, because you will avoid extra charges for returning money promptly.
You can consult with your lending company on how to make your payments automatic. Meanwhile, if you aren’t comfortable with this approach, simply jotting down reminders about the upcoming bills you have to pay could be an option. Your phone calendar or memos app would work well for this.
2. Keep Track Of Your Credit Utilization Rate
This is your ratio of credit card debt to credit limits or the total percentage of balances on all your credit cards divided by the total of all your credit limits. It is an important factor in your credit score, given that the less available credit you use, the better it is for your score.
With this, we encourage you to monitor how much you’re charging to each card. Keep in mind that being close to using 30% of your limit on one card, will force you to make extra payments or switch to using another card. By any chance, you can try to calculate your own credit utilization ratio, by dividing your credit card balance by your credit limit and multiply it by 100.3.
Remember that a low credit utilization reveals that you are only using a small amount of the credit that’s been loaned to you. And, one of the easiest things to do to manage your percentage well is setting up balance alerts that will remind you if your balance surpasses a specific preset limit.
3. Dispute Errors
False details on your credit reports could immediately drag your scores down. Thus, checking your credit reports from all the three credit reporting bureaus for any inaccuracies is necessary.
Verify that the accounts listed on your credit reports are correct. If you see any mistake, dispute the information, and have it corrected right away. Keeping track of your credit report on a regular can help you spot errors before they can even make any damage.
It’s worth noting that this action does not only secure your account. This approach will, more importantly, help you guard against identity theft. Identity thieves may use your information to open a new credit card account in your name. Once they don’t pay the bills, the delinquent account is reported on your credit report.
As we wrap this all up, we’ll reiterate that users are always advised to be responsible cardholders. Keeping a clean record will reflect on many other things in your future, not just your travel plans, job applications, or business ventures.
Getting a 700 credit for a credit score, is indeed, good. And if you’re aiming to achieve this range, Penny Saved can assure you this guide will lead you to where you want to be and help you get what you need – may it be a car loan, a new property, a decent out-of-the-country vacation, or student loans.
Never forget that your payment history, revolving credit, your debt, or the total amount you owed with your account, the duration of your credit history, types of account, and how often you apply for new credit are factors that may impact your score. Maintaining a good credit score would be easier, should you set up automatic payments, keep track of your credit utilization, and dispute inaccuracies.
Due to security risks, Penny Saved also suggests avoiding websites, like internet explorer versions, that are offering free credit scores or credit reports because they may be scams aiming at getting you to reveal personal information. Only trust your lenders. And for more personal finance guide, check Penny Saved for your research.