These days, it’s common for lenders, cell phone companies, landlords, and even utility providers to check your credit before deciding whether to do business with you.
The big question is what exactly do you need to do to impress these companies and get them to accept you as a client? Most credit scoring systems operate on a scale of 300 to 850, but do you really need a perfect score to get the best rates?
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Experts say no. In fact, your score can be well below the top tier and you’ll still be in good shape. Here’s the number experts suggest you aim for if you want your credit score to open doors rather than be a roadblock.
This credit score is pretty good
A score of 700 or higher means you’re considered a pretty good credit risk and don’t need to worry too much, experts say.
“Once you get into the mid-700s, you’re good,” Ted Rossman, senior industry analyst at Bankrate, said in an interview with CNBC. “You don’t need a perfect 850.”
While Rossman acknowledged that you may need a slightly higher score to get the best mortgage rates — something in the 760 to 780 range — he said a score of 740 to 750 is more than enough to help you get the best rates on mortgages and auto loans.
Reports from each of the three major credit reporting agencies — Experian, Equifax and TransUnion — also agree, with the bureaus identifying scores as “good” or “very good” when they reach 700 or above, 740 to 799 and 721 to 780, respectively.
How to make sure your score is good — or excellent
The good news is that many Americans already have a pretty good score, or at least are close to it. The average FICO score, the most widely used credit scoring formula, was about 717 as of fall 2023, according to its creators, the Fair Isaac Corporation.
However, if your score isn’t where you’d like it to be, there are a few simple steps you can take to improve it and reach that coveted 700 range. Here’s what you can do.
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Ask your creditors for help
If you have a history of missed payments, creditors will sometimes work with you to improve your situation if you ask them, especially if you have generally been a good customer or if you can come to an agreement to pay past-due balances.
Payment history is an important scoring factor, so clearing a late payment can instantly improve your credit score. It may be worth asking your creditor to do this by writing them a “goodwill” letter asking for their help.
Be careful about how much credit you use
Having debt that’s more than a certain percentage of your available credit can hurt your score. It’s generally recommended to keep it at 30% or less.
Set up automatic payment
It is important to make each payment in full and on time, if possible.
So, if you know you’ll have enough funds to cover the payments each month, setting up automatic payments can protect you from any black spots on your record because you won’t have to worry about forgetting to pay and ending up with a big score drop because of it.
Keep old accounts open
Avoid closing old accounts. Many people who are trying to improve their credit think that doing so will help them, but in reality, it hurts them. You should keep these old accounts, along with their open lines of credit, on your report so that you can show that you are not using as much of your total credit as possible. You should also maintain the positive payment history that they reflect.
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This article is provided for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.
News Source : finance.yahoo.com
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