What’s a Good Credit Score and How Do I Get There?

A simple three-digit number known as your credit score can make a big difference in your financial life. If you’re thinking of financing a vehicle, applying for a line of credit or buying a home, you're going to want to make sure your credit score is where it needs to be in order to qualify and get the best terms possible. Lenders want to make sure they’re going to be repaid on-time and use this number to determine whether there’s risk involved in lending to you. The higher the credit score, the likelier it is to get approved. 

A credit score takes into consideration the types of accounts you have open such as loans and credit cards, how much credit you use of your available credit, how often you apply for credit and how long your accounts have been opened. 

Credit scores range from 300 to 850 with the average score falling between 600 to 750. If you’re aiming for good, you’re going to want a score that’s at least 700 or higher. 

If you have to prioritize one step, it should be making an attempt to pay your bills on time. Payment history makes up about 35% of your credit score and missing payments or making late payments, can significantly affect your score. Missed payments can stay on your credit report for years. Set up automatic bill pay to help you stay on track. Be sure to contact creditors if you feel you’re going to be late and try to work out some options to avoid any marks on your credit report. 

Tip: Utilize third-party services to help you apply other expenses like utility bills and rent to your credit report to give you a boost.

Try to keep your credit usage low as credit utilization makes up 30% of your credit score. The total of your available balances across all accounts is then divided by your total credit limit giving you your credit utilization ratio. Lenders see low usage as the ability to manage your credit and that you’re not hovering near or maxing out your credit limit. The general rule is to aim for a 30% or less utilization ratio. 

Be mindful of necessity when applying for new lines of credit. Too many attempts to open new accounts means too many hard inquiries which can lower your credit score. Hard inquiries will stay on your credit report for two years. 

Making multiple payments to multiple creditors can be overwhelming which can affect your ability to make payments. If this is the case, debt consolidation could be a good option for relief. Applying for a loan or credit card with a low interest rate to help pay off debt and consolidate to just one payment can also help you pay off your debt faster, helping boost your credit score.