You don’t need a perfect credit score to get the best deals. A score of 720 or higher is generally considered excellent. Credit scores are the tools lenders can use to determine your recovery likelihood. And you don’t get a lower price on the 850 instead of the 811.
This is very good news if you want to join a group of people with great credit but don’t want to think about every point in order to get the highest credit score possible. Richardson says he will not advise anyone with a score of 800 or higher to open new accounts in order to get a higher credit score, as they already qualify for the best conditions on offer. According to the FICO, as of April 2017, 20.7% of the values were 800 or higher. According to Richardson, about 17% of VantageScores are this high.
Fortunately, you don’t need an ideal score to qualify for some of the best loan and mortgage interest rates. Scores in the 1970s can qualify you for high-interest rates. If you score above 760, you will likely get the best rates in the market. why is that? Because banks and credit card companies care less about the numbers identified on your credit reports and more about the broad credit score spectrum your score falls into. Improving your score from 740 to 790 will likely have little effect on your interest rate bids, as both scores fall in the “very good” range. However, if you increase your score from 650 to 700, you may get better interest rates.
Although the VantageScore and FICO scoring models are different, both demonstrate that some factors have a greater impact than others. For both models, the most important factor is the payment history, followed by the total amount of credit you owe (also known as the percentage of credit limit used and total / debt). FICO uses percentages to indicate the importance of each factor to your credit score. VantageScore does not assign percentages of factors, but does indicate that some factors have a greater impact than others. This is how the VantageScore disassembles.
Even if you never miss a payment, your credit reports may contain unacceptable negative points. Check out the Free Transunion and Equifax Credit Reports on Credit Karma and make sure there are no errors. If you find incorrect tags on your reports, you can contest them. After receiving a legal dispute, the credit reporting agencies are required to investigate the errors and correct them in a timely manner. Even if your credit reports contain legitimate negative scores, over time they will have less impact on your score and you will likely withdraw from your reports altogether.
Both evaluation models weigh this factor significantly. To find out your current usage rate, first add credit limits for all of your credit cards. Let’s say you have two credit cards – one with a maximum of $ 2000 and the other with a limit of $ 3,000. This gives you $ 5,000 in total available balance. Next, divide your current balance (what you owe) by your available balance and multiply it by 100 to get the percentage. Imagine you have $ 1,000 in outstanding balance. $ 1,000 divided by $ 5,000 is $ 0.20. In this example, your usage rate is 20%. Since you spend less than your available balance, your use of credit decreases. In the example above, if you reduce your credit card spend to $ 500, your usage rate will drop to 10%. What loan use should you aim for? Using no more than 30% of your available balance is a good place to start.
Why Credit Score Matters
Lenders and other financial institutions use credit scores to get a quick snapshot of your overall credit health. While they usually consider more than just your creditworthiness when deciding on a loan, this three-digit number is an important factor because it will quickly understand the likelihood of returning your debts on time. Some auto and home insurance companies also use something called credit-based insurance value to determine your monthly payments, although not every state allows this.
Most credit rating systems use a scale of 300-850. However, there are some credit rating models as high as 900 or 950, including industry-specific ratings used by certain organizations. Working your way up to an 850 credit score might sound nice, but it isn’t necessary. If you only have a credit score in the above 700s or below the 800s, this means that you are a responsible borrower and will likely qualify for the same conditions as with an ideal credit score.
Timely Payments: On-time payments have the highest weight in your credit score. So make it a goal to pay bills on time every month. If you are late in payment or have a collection account, settle it as soon as possible. Keep your credit card balance low: Your credit history, or the amount of available credit you use, is another important factor in your credit score. Divide your total credit card balance by your total credit limit to find out your usage rate. Using a loan of 30% or more could have a negative impact on your credit score. In general, keeping a credit card balance low in relation to your credit line helps improve your credit score. For the best results, the usage rate should be less than 6%.