In order to be approved for new credit cards or loans, it’s vital to have a good credit score. But what is a good credit score? Credit scores around 700 are considered “good” by FICO and VantageScore, the two most popular credit rating services. But what if your credit score is under 700?
Here’s what you should know about your credit score — and what to do about it if your score is under 700.
1. Check Your Credit Score Regularly
Habitually checking your credit score is a reliable way to pinpoint financial weaknesses so you can create a solid plan to combat them. Plus, it allows you to check for statement errors. To correct any inaccuracies, try contacting the lender or creditor and alert them of the error. If they agree a mistake has been made, they are responsible for updating the record with the credit bureaus. If that route doesn’t work, you can file a dispute with any of the three credit bureaus that where the inaccuracy appears. Disputes can be filed online at each bureau’s website or by mail.
While there are several ways you can check your credit score, one excellent option is to sign up for Chase Credit Journey. The service is free and it’s available to anyone. Once you’re signed up, you’ll have the freedom to check your score online anytime and as frequently as you want. Plus, you won’t harm your score because this type of check is known as a “soft inquiry” — the information is only for you.
Chase Credit Journey also provides a bunch of additional features you wouldn’t ordinarily expect in a free service. These include identity monitoring services such as dark web surveillance, data breach monitoring and tracking of activity connected to your Social Security number. All these benefits add up to supply you with the complete tool kit you need to begin improving your credit score.
2. Make Payments on Time
In order to reach your ideal credit score range, making payments on time is crucial. Missing payments can negatively impact your credit score. Setting up automatic payments removes the need to remember to pay your recurring bills.
3. Avoid Closing Old Accounts
The temptation is strong to close credit cards once they’re paid off, but leaving them open can build up your credit score. That’s because the way you handle current lines of credit is of more interest to creditors than how you handled past credit lines. Recently closed accounts will still factor into your score, but open accounts will carry more weight. The age of your credit history amounts to 15 percent of your total FICO score. When combined with your credit mix, it accounts for 21 percent of your score from VantageScore.
4. Add Missing Accounts or Utilities to Credit Report
Utility companies do not share information with consumer reporting agencies, but thanks to the Credit Access and Inclusion Act, you can include utilities, phone and rent payment history to improve your score. You can use your utility payment history to establish or boost your credit score if you haven’t established a credit history or have a low credit score. Experian offers a free service called Experian Boost that allows you to report your utility bills as well as other payments you make, such as for streaming services. TransUnion offers a similar service that allows you to report various non-credit accounts for an annual fee.
5. Increase Your Credit Limit
Increasing your credit limit isn’t a viable solution for everyone, but if you already have good credit, doing this can encourage your score to rise above 700. Your credit limit is a contributing factor to the utilization ratio because it represents the amount of available credit. An increased limit can help lower the ratio, improving overall credit.
6. Make Small Purchases With Your Credit Cards
Managing credit cards responsibly can help rebuild credit scores. Budgeting money and only making purchases you can pay off immediately will create positive gains. For example, instead of paying cash for everyday expenses such as gas and groceries, pay with your credit card and then pay off your card balance right away. This will allow you to build your credit without running up against your credit limit.
7. Pay Off Your Maxed-Out Credit Cards
Having a large amount of debt negatively impacts your credit score. Maxed-out credit cards look bad on credit reports due to the adverse proportion of the debt to credit limit.
Pay your cards with the highest interest rates first. The objective is to lower your utilization ratio, or total credit card balances divided by your credit limit. Paying down your debt lowers that ratio, and can be a solution to how to get your credit score above 700.
8. Don’t Open Too Many New Accounts at Once
Newly opened credit determines 10 percent of your FICO credit score and about 5 percent of your VantageScore credit score. Opening multiple credit accounts too quickly adds greater risk, particularly for those with a short credit history. Also, rejected applications might show up on the report, which can lead to a credit score decline.
9. Be Aware of the Rate-Shopping Window
When you need to open a new line of credit — whether it be for a new car, student loan or mortgage — of your window for rate shopping. When you apply for a loan, the lender will check your credit in what is known as a “hard inquiry.” This type of inquiry can cause a dip in your credit score. However, similar inquiries made within a short timeframe will have minimal impact on your credit score. So if you plan to apply with multiple lenders, try to do so within a narrow window. In FICO’s latest scoring model, that window is 45 days. For VantageScore, the window is 14 days.
10. Remain Consistent
You’re on the right path to improving your credit score if you already have good credit. Building your credit takes perseverance, especially if you have past delinquencies, missed payments and bankruptcies, but will pay off in time. Continue to practice good financial habits — periodically checking your credit report, keeping debts to a minimum, making payments on time — and you’ll be able to maintain and even improve your 700 credit score.
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