700 Credit Score: What It Means for You And How To Reach It
Credit scores are essential to U.S. personal finance, but they aren't built overnight. The ultimate goal is to have a credit score above 760. That's the "magic number" that gives you access to premium credit cards and lower interest rates on loans.
But there are milestones along the way that can help you financially and should be celebrated.
That's what this series is about, and today, we'll discuss a 700 credit score, what it means for you, and how you can get there.
Credit score ranges
These are the credit score ranges:
300 to 579: Poor
580 to 669: Fair
670 to 739: Good
740 to 799: Very Good
800 to 850: Excellent
700 credit score
With a 700 credit score, you are firmly in the "Good" range! In order to have achieved a 700 credit score, you have demonstrated to creditors that you handle credit responsibly; you pay your bills on time, keep your utilization relatively low, and have an established credit history. That last one can be the most difficult to achieve for those new to the U.S. credit system.
You may have done everything perfectly when it comes to credit, but there is nothing that can give you credit history but time. And because it takes time, the earlier you can start building credit, the better.
A 700 credit score will make it easier to get approved for better credit cards, those with helpful perks like cash back and travel rewards. And a 700 credit score makes being approved for loans, personal, mortgage, auto, business, or student loans easier.
You are not quite to the point where you'll get the best interest rates, but a 700 credit score will give you more options and better interest rates than you've had previously when shopping for loans.
Reaching a 700 credit score
If your score is not yet at 700, you can take steps to get there.
Upwardli
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Increase your credit limits
Utilization, how much of your credit you're using compared to your total limit, makes up 30% of your credit score. Creditors like to see utilization below 30% but the lower, the better. Paying off your entire credit card balance each month ensures that you don't pay any interest charges.
There are two ways to lower utilization, paying down balances and increasing credit limits. In some cases, a credit card company will automatically raise your credit limit and mail or email you a notice of the new limit. But you can also call and ask for a limit increase. They don't always grant the increase, but it doesn't hurt to ask.
Consider a mix of credit
There are two types of credit, revolving and installment. An example of revolving credit is a credit card. You have a limit, you make a payment each month, and you can continue using the card; the account has no end date.
An example of installment credit is a loan, be it personal, a mortgage, a business, a student, or auto loan. You borrow money, you have a set number of payments, and the account is closed when you make the final payment.
Lenders like to see a mix of credit as it shows you can handle more than one type of account. Credit mix accounts for 10% of your credit score. If you only have one type of credit, consider taking out the other.
But remember, you should never take on additional debt solely to build your credit score. In fact, while overall, a mix of credit can improve your score, it gives you a mix of course and can lower utilization; it also drops your score by a few points immediately. Inquiries are also part of your credit score, and each time you apply for credit, it goes onto your credit report.
In our next article, we will discuss the next credit score milestone, a 760 score.