A credit score of 700 puts you in the middle of what is considered the right range for FICO ratings. Mostâ¦
A credit score of 700 puts you in the middle of what is considered the right range for FICO ratings. The most recently reported average FICO score in the United States is 716, so you do pretty well in comparison.
With a FICO score of 700, you are likely to get good interest rates on credit cards and loans. You will also be eligible for a mortgage, but not the lowest rates.
But if you want the lowest rates, you will need to increase your FICO score to 760, which is considered very good credit.
[Read: Best Credit Cards for Good Credit.]
FICO score ranges
It’s possible that a lender will use a VantageScore model when you apply for credit, but since FICO is used by 90% of lenders, let’s focus on that score. If you build a better FICO score, you will likely improve your VantageScore because the factors considered are very similar.
This is how the FICO score ranges are:
– Exceptional: 800-850.
– Very good: 740-799.
– Good: 670-739.
– Fair: 580-669.
– Poor: 300 -579.
While a FICO score of 700 is perfectly acceptable, your goal is to move to the next range, which is the very good range, to achieve a credit score of 760.
It might sound daunting, but the easiest and fastest way to improve your score is to educate yourself on each of the five factors that make up your score.
How your FICO score is calculated
There are five factors that make up your FICO score. Here is each factor and the weight assigned to it by the FICO algorithm.
– Payment history: 35%
– Amounts due: 30%.
– Length of credit history: 15%.
– New credit: 10%.
– Credit mix: 10%.
Payment history: 35%
This factor carries the most weight. If you make a commitment to pay all of your bills on time, you’re on your way to a great score.
Even a single payment more than 30 days late can result in a significant drop in your score. The higher your score, the lower it will drop.
If cash flow is an issue, ask your credit card issuer to change your due date to more closely match your paycheck. Also make sure you have a budget and track spending so you don’t overspend.
But if the problem is that you don’t have enough money to pay the bills, then contact your creditors and ask for help.
Amounts due: 30%
Your credit utilization rate is the amount of credit you have used compared to the amount of credit you have. You must have a ratio of less than 30%. If you are trying to increase your score quickly, keep your ratio at 10% or less.
Here’s an example: you have a credit card with a limit of $ 2,000. Let’s say your balance is $ 600. This means that you have a 30% credit utilization rate (600/2000 = 30%). This is considered acceptable.
However, if you are aiming for a 10% ratio, your balance should not exceed $ 200 (200/2000 = 10%). And you want to make sure that your total usage rate on all credit cards is also less than 10%.
[Read: Best Balance Transfer Credit Cards.]
Length of credit history: 15%
While the length of your credit makes a difference in your FICO score, that doesn’t mean you need decades of credit before you have a good score.
This part of the score takes into account the length of time your accounts were opened, including the average age of your accounts. You can’t change the length of your credit, but as long as you use your accounts regularly and practice good credit habits, you’ll be fine.
New credit: 10%
Every time you apply for a credit card, it’s a tough investigation, which can lead to a loss of two to five points in your FICO score. And that’s for every request.
The good news is that FICO scores only take into account the last 12 months of new credit applications. So lay out your credit card applications. And if you’re planning to shop around for a mortgage in the near future, don’t apply for new credit within six months.
Credit mix: 10%
Your credit mix is ââonly 10% of your score, but every little bit counts. A good mix of credits can include both revolving credits and installment loans. For example, you might have a mortgage, credit cards, and maybe a student loan on your credit report.
This does not mean that you should buy a car to get an installment loan on your credit report. Over the course of life, as your needs change, you will find that your report naturally begins to show a combination of credits.
[Read: Best 0% APR Credit Cards.]
How To Improve Your 700 Credit Score
Now that you understand what goes into your FICO score, you can use that knowledge to your advantage. Practice these good credit habits and you will be able to increase and maintain your credit rating.
– Pay all your bills on time. This is crucial. Make all payments on time, not just credit cards. Set up email or text reminders, automatic payments, or whatever it takes to avoid missing a payment.
– Keep credit card balances low. Remember that your credit utilization rate has a big impact on your credit score. That’s 30% of your score, so keeping balances low can really help boost your score.
– Pay off the debt. You now know the link between your score and your usage rate. Debt increases your ratio. As you pay off your debts, your score improves. But only if you stop using credit cards so you don’t increase your debt. Step away from the cards and focus on eliminating debt.
– Regularly review your credit report. Sometimes errors on credit reports occur. So all you need to do is review your report and make sure you don’t see any mistakes that could lower your score. If you have any negative items, check the details for accuracy, including dates.
– Don’t obsess over your score. All you need to do is make sure you practice the good habits from this section. It’s fun to watch the progress, and there are plenty of free apps to check your score. But getting better takes time and patience. Just follow the suggestions above and your score will increase steadily.
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Credit Score 700: Is It Good Or Bad? originally appeared on usnews.com