September 20, 2018
Like it or not, your credit score may play a bigger role in your life — and your lifestyle — than you think. While good or excellent credit can help you qualify for a mortgage and personal loans with the best interest rates and terms, the opposite is also true; poor credit can make it impossible to borrow the money you need. Even if you can qualify for a loan with poor credit, you will typically pay higher interest rates and more fees.
Fortunately, you do have some power over your credit and your credit score. With responsible use of credit cards and loans, you can help your credit score inch toward “good” or “excellent” ranges so you can have the life you want.
It all starts with knowing what a good credit score is and the steps you can take to achieve this milestone. Keep reading to learn more about credit score ranges and how to improve your score over the long haul.
What is Good Credit Anyway?
When we talk about credit scores in this post, we’re referring to the FICO scoring method. We use this method because the FICO score is the most popular credit score out there, and because it’s used by 90% of top lenders.
FICO scores fall in between 300 and 850 with higher scores representing better credit health. The following ranges offered by myFICO.com show what is generally considered good, excellent, and poor credit:
||Likelihood of Qualifying
||Low- FICO website myFICO.com notes that consumers with exceptional credit default at a rate of 1%, on average.
||According to myFICO.com, consumers with FICO scores over 800 shouldn’t have any problem qualifying for loans with the best rates and terms.
||Low- Only around 2% of consumers with FICO scores in this range default on loans and credit cards.
||Consumers with scores in this range have a great chance at qualifying for loans with the best rates and terms.
||Medium- Only around 8% of consumers in this range default on their loans.
||Borrowers are generally considered “acceptable” at this range, meaning they may or may not qualify for loans with the best rates and terms.
||Medium-High- About 28% of consumers in this range will become delinquent on loans or credit cards.
||Consumers in this range may have difficulty getting approved for new credit. If they do get approved, they will likely need to pay a higher interest rate or fees.
||Approximately 61% of consumers in this range become delinquent, according to myFICO.com
||Most consumers with scores in this range cannot qualify for new credit without putting down a deposit.
How to Check Your Credit Score
Now that you know all about the various FICO score ranges, it’s important to find out where your own score falls. Fortunately, it’s easy to get an estimate of your credit score online.
To get a copy of your score for free, all you have to do is provide some very basic information.
Plan to share:
- Your full name
- Your address
- Your date of birth
- Your email address
- The last four digits of your social security number
- Whether you have a checking or savings account
You do not need to have a credit card or enter your financial details to get a free copy of your credit score. The form you fill out to access your credit score is also backed by TLS/SSL Secure technology so your personal information is always safe. Sign up to get your free credit score here.
How to Boost Your Credit Score in a Hurry
Finding out your credit score is a solid first step toward helping it improve over time. After all, you need to know where you stand before you can take steps to improve.
Once you know your credit score, there are several ways to ensure you’re doing all you can to help it increase over time. Consider these tips to boost your credit score in record speed:
Pay all bills on time: The top determinant of your credit health, which makes up 35% of your FICO score, is your payment history. This means that on-time payments go a long way toward improving your credit score, but it also means that late payments do a lot of damage. To keep your credit score in the best shape possible, make sure you’re paying all your bills either on-time or early each month.
Pay down debt: The second most important factor that makes up your credit score is the amount of money you owe in relation to your credit limits. Since this factor makes up 30% of your FICO score, it’s easy to see why paying down existing debt will help. Credit bureau Experian notes that you should strive to keep amounts owed, also called your credit utilization, below 30%.
Don’t open too many new credit cards: New credit makes up another 10% of your FICO score, which is why you should stay away from opening too many new cards at once.
Keep old credit accounts open: The length of your credit history makes up another 15% of your FICO score, with shorter lengths counting against you. For that reason, you should try to keep old accounts open — even if you aren’t using them right now. Closing old accounts can also increase your credit utilization by default since you’re effectively reducing the amount of open credit you have available.
The Bottom Line
Having good credit can make a huge difference in how your life plays out, mostly because good credit gives you more opportunities and makes borrowing money significantly cheaper. Good credit can help you qualify for a mortgage or an apartment and can even lead to lower insurance rates, after all.
If your credit score needs help, on the other hand, it’s not too late to turn things around. Take the steps we’ve outlined above to heart and do your best to improve your credit score in small, subtle ways over time. The work you put into your credit score now will be rewarded in the form of lower rates and better opportunities later on.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.