These days, it’s common for lenders, cell phone companies, landlords and even service providers to check your credit before deciding whether they want to do business with you.
The big question, however, is what exactly you need to do to impress those companies and make them comfortable accepting you as a customer. Most credit scoring systems work on a scale of 300 to 850, but do you really need a perfect score to get the best rates?
Don’t miss out
Experts say no. In fact, your score can be a little lower than the top level 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 instead of serve as a barrier.
This credit score is quite good
A score of 700 or higher means you’re considered a pretty good credit risk and you don’t need to worry too much, experts say.
“Once you get to the mid-700s, you’re good,” Ted Rossman, a senior industry analyst at Bankrate, told CNBC in an interview. “You don’t need a perfect 850.”
While Rossman acknowledged that you might need a slightly higher score for the best mortgage rates — something in the 760 to 780 range — he said a score of 740 to 750 is good enough to get you through get the best loan and vehicle rates. loans.
Reports from each of the three major credit reporting agencies — Experian, Equifax and TransUnion — also match, with the bureaus respectively identifying scores as “good” or “very good” once they reach 700 or above, 740 to 799 and 721 to 780.
How to make sure your score is good – or great
The good news is that many Americans already have a pretty good score, or at least come close. 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 some simple steps you can take to give it a boost and get into that coveted mid-700 range. Here’s what you can do do.
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Ask your creditors for help
If you have a record of missed payments, sometimes creditors will work with you to improve your standing if you ask them to – especially if you’ve been a generally good customer or made an agreement to pay any overdue balances.
Payment history is an important rating factor, so removing a late payment can provide an immediate boost to your credit rating. It may be worth making the request to your creditor by writing a “goodwill” letter asking for their help.
Be careful how much credit you use
Carrying a debt load above a certain percentage of your available credit can be detrimental to your score. The general wisdom is to keep it at 30% or lower.
Set up automatic payment
It is important that every payment is made in full 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 against any black spots on your record, as you won’t have to worry about forgetting to pay and find yourself with a huge score drop because of it.
Keep old accounts open
Avoid closing old accounts. Many people trying to improve their credit think it will help, but it actually hurts. You want to keep those old accounts — and their open lines of credit — on your report so you can show you’re not using as much of the total credit available to you. You also want to keep the positive payment history they reflect.
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This article provides information only and should not be construed as advice. Offered without warranty of any kind.