Your credit score plays a vital role in your financial life. It impacts everything from loan interest rates and credit card approvals to apartment rental applications and job offers. But what constitutes a “good” credit score? And how can you make sure yours measures up?
In this blog post, I will explain everything you need to know about good credit scores – what they mean, why they matter, and tips to improve yours.
Credit Score Ranges and Ratings
The most common credit score scale ranges between 300 and 850. In general, the higher the number, the better the interest rates you’ll pay and the opportunities you’ll have access to.
Here is how the various credit score ranges break down:
Excellent Credit (750-850)
A credit score above 750 is considered excellent and gives you access to the best rates and offerings, including:
- Credit cards with lucrative rewards programs
- Mortgages and auto loans under 5% interest
- Quick approvals without security deposits
Maintaining excellent credit should be every consumer’s goal, provided you practice responsible habits (more below).
Good Credit Score (700-749)
A credit score between 700 and 749 is solidly on the “good” side of personal finance. Perks include:
- Approved for most loans and credit cards
- Decent interest rates around 10%
- No need for borrower security deposits
People with good credit have clearly demonstrated responsible behavior lenders want to see.
Fair Credit Score (650-699)
Credit scores from 650 to 699 overall are OK but show some areas needing work, which leads to:
- Fewer opportunities than good/excellent ranges
- Potentially higher interest rates around 15%
- Lower chances for the most attractive rewards cards
Improving from fair to good credit opens up better options so take positive actions if needed.
Bad Credit Score (300-649)
Those with bad credit scores below 650 will struggle getting approved for cards and loans at affordable rates due to being labeled “high-risk” borrowers. Issues that arise include:
- Sky-high interest rates exceeding 25%
- Rejection from most lenders
- Need for down payments or collateral to qualify
Bad credit makes everything more challenging and expensive. Use secured products to rebuild back into good standing over time.
Why Your Credit Score Matters
Clearly, higher credit scores unlock attractive offers and lower rates saving you money each month. But the advantages go even deeper, impacting your entire financial life.
- Loan Costs
For every 50-point increment above 700 your credit score rises, lenders typically decrease interest rates by nearly 0.5%. This means excellent credit scores above 750 save many borrowers thousands in interest expenses over the lifetime of large loans like mortgages and auto financing.
- Approval Success
Whether applying for an apartment, mortgage, credit card, or even a job, approval hinges greatly on your credit rating. Scores below650 lead to exponentially more rejections while excellent scores facilitate quick, often automated approvals. Maintaining great credit dramatically improves your chances anytime credit checks are involved.
- Access to Rewards
Prime credit card rewards and point systems remain reserved for borrowers boasting pristine payment histories and credit. Cards offering sign-up bonuses, cash back on all purchases, and travel mile rewards want assurance policyholders are assets not liabilities. Excellent credit scores give the highest confidence in your money management abilities.
- Financial Discipline
Lastly, excellent credit serves as strong evidence you adhere to financial principles and long-term thinking crucial for household success. From emergency savings to retirement investing and more – those diligent with their credit tend to take responsibility across all financial matters leading to lasting stability and wealth over time.
In summary – higher credit scores save you money while opening up opportunities and signaling financial responsibility. Now let’s examine how to start improving yours.
5 Proven Ways to Increase Your Credit Score
Boosting your credit by over 50+ points in under 6 months is achievable for most people willing to apply focused effort. These powerful tactics make it happen:
- Pay All Bills Early and In Full
Payment history is the biggest scoring factor (35%). Set up automatic payments so you never miss a bill, even by a few days. Shooting for a 0% late payment history over time maximizes this pivotal category.
- Keep Balances Very Low
The second biggest factor is credit utilization (30%). This measures your current balances against available limits on each card. Use less than 10% of your total limits monthly and then pay off cards completely to avoid high utilization dings. For example – if your limits equal $20k across all cards, keep monthly spending under $2k before paying in full.
- Monitor and Dispute Any Errors
Errors can tank a score fast. Review all 3 bureau reports yearly and dispute immediately if inaccuracies are dragging your score down unfairly per FCRA laws.
- Ask for Higher Credit Limits
Ask lenders for periodic credit line increases with on-time payments. Higher limits allow you to spend more freely while keeping utilization low – boosting your score over time.
- Mix in Installment Loans Sparingly
Adding an occasional installment loan or mortgage and paying diligently over 2-4 years shows credit diversity and further lifts scores as long as overall debts remain minimal.
Stick to these proven tactics, and your credit score picture will look brighter and brighter!
How Often Credit Scores Change
An improving credit score doesn’t happen overnight. Scores fluctuate moderately on a monthly basis depending on your credit activities and reporting cycles.
However, expect to wait at least six months before seeing significant upward movement by applying responsible financial habits consistently.
And your scores will continue trending higher over subsequent years as your history lengthens assuming you avoid negatives like missed payments or overspending.
Patience and diligence end up paying major dividends for those wanting to unlock excellent credit!
Tips to Speed Up Positive Impacts
If you need your score to improve more quickly, here are insider strategies to accelerate your progress:
Prioritize correcting errors – Fixing reporting mistakes provides an instant increase once investigations conclude. Don’t let inaccuracies drag you down unfairly.
Apply for credit limit increases – Securing higher spending power keeps utilization favorable as balances rise over time.
Avoid unnecessary hard inquiries – Each application triggers an inquiry lowering scores temporarily. Only apply for needed new accounts.
Leverage mix strategically – Judiciously adding installment history elevates your diversity and depth of credit kinds.
With a focused game plan, you can slash years off the typical pace it takes to reach excellent credit ranges. Stay persistent and proactive!
Credit Score Myths and Facts
Given how instrumental credit scores are to securing the best rates and offerings, misconceptions abound regarding what moves the number up versus down.
Let’s clear up key myths:
Myth: Checking your own score lowers it – Performing a self-check through a reputable website triggers a soft inquiry only visible to you, not lowering the number.
Myth: Using extra available balance helps – Maxing out cards actually hurts by spiking your utilization ratio. Keep balances under 10% of limits instead.
Myth: Credit repair fixes bad reports – No quick fix can remove accurate negatives. Good behavior and patience over years necessary to add positive information.
Myth: Missing one payment ruins credit – While inadvisable, one 30-day late payment won’t devastate otherwise solid history. Multiple repeats would significantly damage scores however.
Let these facts guide your score-building activities and overrides false assumptions. Your credit knowledge powers progress!
I hope this breakdown gives you clarity that excellent credit should be everyone’s end goal given the advantages. Scores over 750 save you money through lower rates and elevate approval odds for top-tier financial products.
Improving subprime scores just takes diligent money management over time. Monitoring credit reports, fixing errors quickly, keeping balances low, and never missing payments will get you there!
Commit to steady progress using proven score-elevating strategies this year. Your future self will thank you as offers and savings start rolling in to your financial responsibility.