A 700 credit score puts you in the middle of what’s considered the good range for FICO scores. The most recently reported average FICO score in the U.S. is 716, so you’re doing pretty well by comparison.
With a 700 FICO score, you’re likely to get good interest rates on credit cards and loans. You’ll also qualify for a mortgage, though not at the lowest rates.
But if you want the lowest rates, you’ll need to bump up your FICO score to 760, which is considered to be very good credit.
FICO Score Ranges
It’s possible that a lender might 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’ll most likely be improving your VantageScore because the factors considered are very similar.
Here’s how the FICO score ranges are:
— Exceptional: 800-850.
— Very good: 740-799.
— Good: 670-739.
— Fair: 580-669.
— Poor: 300 -579.
Although a 700 FICO score is perfectly acceptable, your goal is to move up into the next range, which is the very good range, to attain a 760 credit score.
That may sound daunting, but the easiest — and fastest — way to improve your score is to educate yourself about 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’s each factor and the weight it’s given by the FICO algorithm.
— Payment history: 35%
— Amounts owed: 30%.
— Length of credit history: 15%.
— New credit: 10%.
— Credit mix: 10%.
Payment History: 35%
This factor carries the most weight. If you vow to pay all of your bills on time, you’re on a path toward a very good score.
Even just one payment that’s more than 30 days late can create a significant drop in your score. The higher your score, the more it will drop.
If cash flow is an issue, ask your credit card issuer to change your due date so it aligns more closely with your paycheck. Also be sure you have a budget and track spending so that you don’t overspend.
But if the problem is that you don’t have enough money to pay the bills, then reach out to your creditors and ask for help.
Amounts Owed: 30%
Your credit utilization ratio is the amount of credit you’ve used compared with the amount of credit you have available. You need to have a ratio of less than 30%. If you’re trying to increase your score quickly, keep your ratio to 10% or less.
Here’s an example: You have a credit card with a $2,000 limit. Let’s say your balance is $600. This means you have a credit utilization ratio of 30% (600/2,000 = 30%). This is considered acceptable.
However, if you strive for a 10% ratio, your balance shouldn’t exceed $200 (200/2,000=10%). And you want to make sure your total utilization ratio across all credit cards is also less than 10%.
Length of Credit History: 15%
While the length of time you’ve had credit makes a difference in your FICO score, it doesn’t mean that you need decades of credit before you can have a great score.
This part of the score considers how long your accounts have been open, including the average age of your accounts. You can’t change how long you’ve had credit, but as long as you use your accounts regularly and practice good credit habits, you’ll be fine.
New Credit: 10%
Each time you apply for a credit card, it’s a hard inquiry, which can result in losing two to five points off your FICO score. And that’s for each inquiry.
The good news is that FICO scores only consider the past 12 months of new credit inquiries. So spread out your credit card applications. And if you’re planning to shop for a mortgage anytime soon, don’t apply for new credit within at least six months before doing so.
Credit Mix: 10%
Your mix of credit is only 10% of your score, but every little bit helps. A good mix of credit might include both revolving credit and installment loans. For example, you might have a mortgage, credit cards and perhaps a student loan on your credit report.
This doesn’t mean you should go out and buy a car to get an installment loan on your credit report. Over the course of life, as your needs change, you’ll find that your report begins showing a mix of credit naturally.
[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 this knowledge to your advantage. Practice these great credit habits , and you’ll be able to build your high credit score and keep it there.
— Pay all of 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 low balances on credit cards. Remember that your credit utilization ratio has a big impact on your credit score. It’s 30% of your score, so maintaining low balances can really help to increase your score.
— Pay down debt. Now you know the connection between your score and your utilization ratio. Debt increases your ratio. As you pay down debt, your score will improve. But only if you stop using credit cards so you don’t add to your debt. Step away from the cards and focus on debt elimination.
— Review your credit report regularly. Errors on credit reports do happen occasionally. So just review your report, and make sure you don’t see any errors that could drag down your score. If you do have negative items, check the details for accuracy, including the dates.
— Don’t obsess over your score. All you need to do is make sure you practice the good habits in this section. It’s fun to watch the progress, and there are a multitude of free apps to check your score. But improving does take time and patience. Just follow the suggestions above, and your score will steadily rise.
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