Why Good Credit Scores Matter
While credit scores help determine your availability of credit and the rate youll pay to access it, what it really measures is your statistically proven likelihood of defaulting on the money you borrow. The greater the risk, the lower your score and the more youll pay to access credit if you can access any credit at all.
In August 2021, the average interest rate on a subprime credit card or a card for customers with subprime credit was 25.88%, while the APR on a low-interest card was 12.96%.
If you carry an average balance of $3,000 month to month on an average subprime credit card, expect to pay about $64 in interest charges. Compare that to $32 in interest charges for an average low-interest credit card, and youre paying twice as much in interest. Low-interest credit cards are typically only available to people with excellent credit scores, and this example demonstrates the importance of building good credit.
Improving Your Credit Score Range
So now you know where your three-digit number falls in the credit score ranges. If you already have excellent credit ranging from 780 to 850 congratulations.
Your only job now will be to keep doing what youre doing to maintain stellar creditworthiness.
If you have very good credit, you may want to figure out how to optimize your score even more to achieve an even-better three-digit number. Keep reading to learn ways to fine-tune your credit life.
For everyone else, you probably have a little work to do to get into a better credit score range.
Like I said above, dont worry if your credit score has parked itself at the lower end of the spectrum. Ill show you exactly where to start working to achieve the best credit possible.
Where To Go From Here
Its important to pay down your balances and keep your credit utilization under 30%. Its also wise to have several different types of credit accounts that include a mix of installment and revolving credit.
Of course, you also want to focus on making timely payments from here on out. Even one late payment can be very damaging to your credit.
Length of credit history also plays an essential role in your credit scores. You want to show potential creditors that you have a long, positive payment history.
Building excellent credit doesnt happen overnight, but you can definitely speed up the process by making the right moves.
Give Lexington Law a call for a free credit consultation at and get started repairing your credit today! The sooner you start, the sooner youll be on your way to having excellent credit.
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Average Credit Score By Age
The average credit score looks very different between age groups. As credit scores are calculated on credit and borrowing history, older people have higher credit scores on average due to a more extensive borrowing history. Here’s how it breaks down by age group, according to data from Experian:
|Generation||Average credit score in 2019|
Wells Fargo Platinum Card
*This offer is expired or no longer available.
- 0% introductory APR: 0% for 18 months on balance transfers and purchases.
- Other features: Access to My Money Map, a tool that helps with budgeting, advanced security features, access to your FICO® score.
Why the Wells Fargo Platinum card is a good option for those with good/excellent credit
The Wells Fargo Platinum card has no annual fee and an intro APR of 0% for 18 months on balance transfers and purchases, making it the perfect card for anyone that needs to pay off a large debt, or who needs to make a big purchase with some leeway to pay it off.
How to use the Wells Fargo Platinum card
Once youve set up your account, youll just transfer balances from other credit cards to your Wells Fargo Platinum card. You can also make purchases at 0% for 18 months. If you monitor your credit score and takes steps to improve it, you can reduce the interest rate youre offered after the introductory period.
Why you might not want to consider the Wells Fargo Platinum® card
There are no rewards associated with this credit card, so its better for those who are working hard to reduce their debt.
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Buying A House With A Credit
The upside to buying a house withyour spouse or partner is that youre likely combining two incomes, which canhelp you qualify for a larger mortgage payment and therefore a more expensivehome.
The downside is that oneco-borrowers low credit score can tank the application for both borrowers.Thats because mortgage lenders look at the lower credit score betweenthe two of you to determine your loan options and interest rate.
Depending on your partners creditscore and income, there are a few different options for how you can approachthis issue on your mortgage application.
Consider applying for the loan on your own
Before undertaking a bad credit application, use a mortgage calculator to see if you can qualify for the loan on your own. If your income is sufficient, you can leave your partner off the mortgage altogether.
You can always add them tothe property title once the mortgage closes. However, doing this gives yourpartner some ownership interest in the property, while you would be the onlyone obligated to pay the mortgage.
Note that if you have jointbank and investment accounts, you can use this money for your down payment andcount it as an asset on your mortgage application. Your partner will have towrite a letter stating that you have access to 100 percent of thejointly-held funds.
Money in accounts that aresolely in your partners name wont be considered assets available to you under mostprogram guidelines.
Use your partners income, not their credit
What’s So Good About A Good Credit Score
A credit score in the good range may reflect a relatively short credit history marked by good credit management. It may also characterize a longer credit history with a few mistakes along the way, such as occasional late or missed payments, or a tendency toward relatively high credit usage rates.
Late payments appear in the credit reports of 29% of people with FICO® Scores of 722.
Lenders see people with scores like yours as solid business prospects. Most lenders are willing to extend credit to borrowers with credit scores in the good range, although they may not offer their very best interest rates, and card issuers may not offer you their most compelling rewards and loyalty bonuses.
Also Check: Goverment Free Credit Score
What Credit Score Is Needed To Buy A House
You dont need flawless credit to get a mortgage. In some cases, scores can even be in the 500s. But because credit scores estimate the risk that you wont repay the loan, potential lenders will reward a higher score with more choices and lower interest rates.
For most loan types, the credit score needed to buy a house is at least 620. But higher is better, and borrowers with scores of 740 or more will get the lowest interest rates.
Whats Considered A Good Credit Score
If youre trying to build or maintain healthy credit, knowing whats considered a good score can be helpful. As you know, a good credit score can help you get approved and get better rates for loans and other credit.
Higher is generally better, but its hard to say specifically what a good score is. Whats considered a good score can differ by lender and based on the credit youre applying for. There are also different scoring models, so a good score may vary depending on what product or services you use to see your scores. That said, read on to learn what a good credit score range is when you check your score with TransUnion.
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What If You Don’t Have A High Enough Credit Score To Buy A House
Having bad credit or no credit may mean youre unlikely to get a mortgage unless someone you know is willing to help out. Having a co-signer who has a better credit score could help you secure the loan.
Another option would be to have “a friend or more likely a family member purchase the home,” add you to the title and then try to refinance into your name when your credit scores improve sufficiently, according to Ted Rood, a mortgage banker in St. Louis.
If such assistance isnt available to you, your best bet will be waiting and working on your credit.
Have At Least Three Credit Cards But Only Use One
This first step comes completely from my own experience after experimenting with different techniques.
These cards should have long, good payment histories, and low credit utilization .
Its best to use only one of these cards on a regular basis and simply keep the other two cards with a $0 balance.
Its not that you cant ever use the other two cards, but generally, I like to keep their balances at zero. This technique will maximize your credit score.
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Summary: Financing A Car With A 722 Fico Score
It is when applying for loans that the distinction between an excellent and good credit score truly comes to fore. For example, when applying for a loan that is more than how much you earn, then you will need a credit score of at least 680 and it is not different when it comes to an auto loan.
It is practically impossible to secure some loans without a very good credit score. Imagine the interest on a $200,000, 30-year, settled rate contract. If you have a credit score of 760 to 850, you will have to pay an interest rate of 3.083 percent according to FICOs interest number cruncher as of October 2012.
How To Build Good Credit
Approximately 62 million Americans have no credit data to score or are considered thin files . When just starting your credit score journey, it can be difficult to access financial products to build credit if you dont even have a credit history established.
Some easy ways to establish a credit history include:
- Get a secured credit card. With a secured credit card, you put up a deposit and the issuer gives you a credit line based on your deposit. Then you use the credit card as normal, making payments and charging purchases on a rotating basis while the issuer reports to all three credit bureaus Equifax, Experian and TransUnion.
- Use non-bureau reporting information such as utility payments, rent payments or bank account history with a program like Experian Boost or UltraFICO to supplement the data in your file.
- Become an authorized user on a trusted persons credit card. If you have a strong enough personal relationship with someone like a family member, ask them if they could add you as an on their account. You dont even have to use the card, as long as the primary account holder uses the card and pays it on time, youll build credit history.
Also Check: Paypal Credit Score
Dont Hit Your Credit Limit
If you want to get into the 800+ credit score club, be sure that you dont use your credit card up to its full limit. Use no more than one-third of your credit limit if you dont want to hurt your credit score, Nitzsche says.
For example, if your credit card has a limit of $9,000, dont have a balance of more than $3,000.
Ideally, credit card utilization should be 10% or less. Jennifer Martin, a business coach, says she has a credit score of around 825, and that she tries to keep her spending to no more than 10% of a credit cards available credit.
Outstanding debt accounts for 30% of a credit score, Ross says.
If you are overextended and close to your credit limit this indicates overextension and you need to work at getting your credit card balances well below the limits, she says.
Heres How To Get A 772 Credit Score:
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You Need A Mortgage Loan
You definitely dont need a mortgage loan to have good credit. However, if you want to max out your credit score, having a mortgage loan with good payment history is a must.
Since a mortgage loan is usually a relatively large loan and more difficult to get than other installment loans such as an auto loan, a mortgage shows creditors you have been responsible enough with your credit to get the mortgage in the first place.
Fair Isaac Corporation, which provides the FICO score, recommends you have a mix of different types of credit accounts. So along with credit cards and installment loans, a mortgage loan is the last piece of the pie to round off your credit mix.
I also want to note I didnt start seeing my credit score go up because of the mortgage loan until about a year later, so it definitely takes some time.
You obviously shouldnt take out a mortgage loan just to get a perfect credit score. But a mortgage loan is normally considered to be good debt, in that interest rates are relatively low and youre financing something that usually appreciates in value.
If you dont already have a mortgage, be sure to fix up your credit report before applying for a mortgage assuming youre ready for homeownership.
What Are The 5 Levels Of Credit Scores
FICO calculates credit scores and categorizes the scores into five levels:
- Exceptional: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
Steve Bucci has been helping people decode and master personal finance issues for more than 20 years. He is the author of Credit Management Kit For Dummies, Credit Repair Kit For Dummies, Barnes and Noble Debt Management, co-author of Managing Your Money All-In-One For Dummies and Debt Repair Kit For Dummies . Steve is an experienced expert witness in identity theft, credit scoring, and debt-related cases. He has been a presenter at the FICO InterACT Global Conference, the Federal Reserve and the International Credit Symposium at Cambridge University in the UK.
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How To Build Your Car Credit
Its important to check your credit score before you start shopping, so you know your baseline. The best way to improve your credit in preparation for an auto loan is to pay your current car loan on time, every month. But here are other ways to improve your credit score in addition to or instead of that if you dont currently have a car loan:
- Pay all bills on time
- Reduce your credit card debt
- Keep your credit accounts open
- Dont apply for other types of credit for six months before applying for a car loan
There are two main credit score models that can produce your credit score:
FICO Score. Your FICO Score, developed by Fair Isaac Corporation, is the most commonly used credit score method by far. It heavily weighs your payment history and how much debt you have compared to your credit limits. It takes about six months of credit history to develop a FICO Score.
VantageScore. The three major credit bureaus developed the VantageScore with the aim to more accurately reflect consumer behavior and risk. Your total credit usage and credit mix are the most important factors in your VantageScore. It takes only about a month of credit history to develop this credit score. Heres specific guidance on how to get a car loan with no credit.
Fico Credit Score Ranges
Heres how to find out exactly where your credit score falls in the range of FICO scores.
- Excellent Credit : With an excellent credit score of 780 or higher you will get the best rates available.
- Very Good Credit : In this range you shouldnt have any problems getting good rates.
- Good Credit : This is a good credit range to be in, but you wont get the very best rates on loans or credit cards.
- Average Credit : Your score could use some improvements, but you should still be able to get decent rates. You can still qualify for most FHA mortgage loans, for example.
- Poor Credit : A credit score in this range means youre higher risk and might have trouble finding decent rates. Youll also get turned down on some credit applications. You could still get some USDA and VA loans if you qualify for those programs.
- Very Poor Credit : Anything less than 580 means that youre very high risk for borrowing. Youll get turned down for almost all credit applications. If you do get approved, the interest rates will be staggering. Dont worry though, this can be fixed!
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