At first glance, a credit score may seem like little more than a three-digit number. But it's so much more than that. Your credit score is a numerical representation of your financial health. In the eyes of banks and other lenders, it communicates your past financial behaviors and decisions, and also indicates how you might behave financially in the future.
Scores can fall anywhere between 300 and 850. Generally, a score of 600 and higher is a good rating and can open multiple financial doors, like help you be approved for a mortgage, a new credit card, or an auto loan.
Building up your score takes time, just as it takes time to improve it. However, you can take specific measures to speed up the process and boost your score, thereby gaining access to better financial opportunities now and down the road.
The importance of credits score
Credit scores fall under one of five categories: poor, fair, good, very good, and excellent. There are multiple ways to compute your credit score, but the most popular models are FICO and VantageScore.
Both platforms generate your score based on information gathered from the three major credit bureaus: Experian, Equifax, and TransUnion.
FICO ranks credit scores on the following scale: 300–579 is a poor score, 580–669 is fair, 670–739 is good, between 740–799 is very good, and 800–850 is excellent.
Generally, 670 is a good score to aim for, while anything below 670 isn’t ideal.
That said, it is important to keep in mind that there is no perfect credit score. Yes, 300 is the lowest possible score, and yes, 850 is the highest possible score. But that doesn't mean you won't achieve your financial goals if your score is only 750, for example.
It isn't easy to achieve a score of 800–850, nevermind maintain that score for an extended period. This would require a flawless credit history, which is rare for anyone.
Credit scores fluctuate per your monthly expenses and bill payments, and that's also fine. Payment history and amounts owed are the two most significant factors in your score, accounting for 35 percent and 30 percent, respectively.
Benefits of having a high credit score
The following are the four main benefits you qualify for if your score is 800 or higher.
One: You're more likely to be approved for credit cards, rental applications, and loans, especially those involving significant assets like a house or a vehicle. A high score indicates high creditworthiness, and therefore, banks will not see you as a risky investment.
Two: You'll enjoy more favorable loan terms. This can include lower interest rates, a smaller initial deposit, and a more flexible installment schedule.
Three: You'll have access to better credit cards. A score of 800 will undoubtedly give you access to credit cards that offer no interest rates and premium benefits for various purchases.
Despite all the temptations that exclusive platinum credit cards offer, plenty of decent cards are still available to you regardless of whether your credit score is 800.
Enter Point Card.
You work hard for your money, and Point works hard for you in return. Point is an alternative tool that gives users the freedom to spend their money while still enjoying exclusive benefits offered by premium cards, including no interest rates, fraud protection with zero liability, and unlimited cash-back on all purchases. Point cardholders are also eligible for bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases, as well as car rental and phone insurance.
In short, Point is an excellent tool for intelligently navigating your financial journey.
Four: An extension on point number three, a score of 800 will also make obtaining a higher credit limit on credit cards much easier.
6 steps to reach and maintain an 800 credit score
Step 1: Check your credit score. This should be your first matter of business. If you don't know your score, you cannot begin to increase it, nor can you address any potential errors. You are entitled to a free credit report from the major bureaus every year, so definitely be sure to take advantage of this service.
Step 2: Keep your credit card balances low. Experts recommend using no more than 30 percent of your credit limit. This factor accounts for 3 percent of your total credit score, so it's best to be conscientious of how you're spending your money. By paying off your monthly credit card balance, you will see your score rise. Credit companies must notify cardholders when upcoming payments are due, so keep a schedule of the date to ensure you don't miss it.
Step 3: Avoid multiple credit inquiries. There are two types of inquiries: soft and hard. Soft inquiries are when you personally check your credit. This does not influence your score. Proactive measures can only benefit you now and in the long run. Hard inquiries are when banks and other lenders check your score. Unlike the former, every time this happens, it influences your score, and if it occurs multiple times in a short period, it will lower your score.
Step 4: Pay everything on time. Adopting a habit of paying your bills on time — whether it’s rent, cell phone payments, car insurance, or your credit card expenses — pays off in the long run. Paying your bills will never be exciting, but doing so consistently and in a timely fashion will give banks good reason to enter into a relationship with you.
Step 5: Pay off your debt. Just as getting into debt will harm your score, paying off your debts will give rise to the opposite, and your score will be significantly more appealing in the eyes of banks.
It is important to remember that taking out a loan is a good thing. It diversifies your credit mixes and helps build your credit history. It's paying back the loan that will ultimately determine whether your score is "good" or "poor."
Step 6: Establish a budget. Living within your means may seem like an obvious tip, but it isn’t always so. A good budget will help you gain control of your spending, whether you’re spending on necessities or for pleasure. And the more you practice moneywise habits, the easier they will become.
FAQs
How long does it take to increase your credit score?
Increasing a credit score depends on the individual and their financial situation. Improving your credit score can happen in a few months or over a few years. Your decisions and how you choose to allocate your earnings determines how quickly your score improves.
For extra context, it can take up to two years for the effects of hard inquiries — meaning when a bank or other lender checks your credit, most likely due to a loan application — to be scrubbed entirely from your credit history. Once the effects of a hard inquiry are gone, your score will rise. Unfortunately, that's a considerable amount of time for a single factor to be corrected.
Is a credit score of 700 good or bad?
Remember, according to FICO, a score that's between 670 and 739 is a good score. Therefore, if you have a ranking of 700 or higher, you are clearly in great financial health.
VantageScore has set the benchmark for a good credit score at 700 to 749, presenting a slightly higher threshold than FICO.
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