Before we dwell into whether 700 is a good credit score or not, you need to understand what a credit score is. A credit score is a three-digit number that is derived on the basis of the statistical analysis of an individual’s credit history. It determines whether you are eligible for loans such as automobile or housing loans, and for a new credit card. The credit card companies check the credit score before issuing a card. If you are planning to apply for a housing loan or a personal loan, the credit score will have a significant impact on the down payment you have to make, and also on the annual rate of interest on the loan.
Credit Score Scale
It is calculated by three main credit bureaus. They are TransUnion, Equifax, and Experian. Each bureau uses its own method or model to calculate it.
One of the models that is very popular is the FICO credit-scoring model. Bill Fair and Earl Isaac founded FICO or Fair Isaac Corporation in 1956. They developed a system to measure the credit risk called FICO. FICO scores are calculated taking into consideration various data of your credit report. The factors that are considered while calculating are payment history, credit history, type of credit, outstanding dues and bills, and new credit, if any. The FICO scale grades between the values 300 and 800. If you want to get a less rate of interest on your loan, then you need to have FICO score of 720.
If your credit score qualifies you for a loan with a favorable rate of interest, then you may say that it is good. During an economic recession, the scale of the credit score will be shifted upwards. To put it more clearly, you need to have very high ratings during an economic crisis, to qualify for a mortgage loan that too at a low rate of annual interest. On the other hand, when the economy is booming, it is possible to qualify at a lower rate with a rating of 650. In such an economic condition, rating of 700 can be considered as an excellent score.
However, in the current grim economic scenario, the banks and the financial institutions have raised the qualification standards for any kind of loans. This is also applicable, if you are applying for a new credit card. Hence, to qualify for a loan with a favorable rate of interest, you need a score of 720 and above. The value of 700 is neither bad nor outstanding, it is just an adequate value.
Tips to Raise it above 700
- When you have an adequate credit score of 700, it means you have not missed out any of your bill payments and have handled your credit with care. You need to understand, it is easier to raise the score from rock bottom than to raise it from 700.
- When you want to raise it from 700 to 720 and above, ensure that you always stay on top of your payments.
- Make an extra effort to pay all the bills, such as utility and credit card bills on time; late payment or lapse of payment can result in a huge difference.
- Make extra payments on your credit card bills. When your credit balance on the credit card comes down, the availability of credit increases and this will reflect in the credit report, causing the ratings to go high.
- Keep all the existing credit accounts active to show the longevity of the accounts in your credit report.
- Do not close any of the existing accounts. These minute things would be considered while raising the score.
- Review the various types of accounts you have in your name. More importance is given to certain credit accounts compared to others.
- For instance, mortgage loan account is given more importance than the credit card account. If the mortgage loan account is well maintained, it would help in having better ratings.
Most of the people apply for a new credit account while trying to raise their ratings. This is a grave mistake. Remember, when you are applying for a new credit account, the concerned company would pull out your credit report to check the credit history. If there are too many inquiries for your credit report, it would affect the score and eventually it would come down.