Having an excellent credit score not only clears obstacles when obtaining lines of credit, loans and other types of financing, there is also a sense of pride to be had in maintaining good credit. Getting a credit score above 700 isn't terribly difficult, but it does require a healthy dose of responsibility and patience.
What Is Credit
Credit is when you are loaned a sum of money, or allowed to make purchases, with the agreement and acknowledgement that you must pay this money back. There are largely two types of credit that can be extended to you, loans or credit cards. However, these types are broken down further into revolving credit, charge cards, service credit and installment credit.
When you are extended revolving credit, a bank or other financial institution makes an amount of credit available to you. Credit cards are one example of revolving credit, and you are able to make charges against this credit until the limit is reached. Every month, the previous balance carries over, if you have not paid it off.
Charge cards work in a manner very similar to credit cards, except the balance you rack up must be paid off monthly. Charge cards may or may not impose a credit limit, which means consumers need to exercise control and diligence when using them as to not find themselves stuck with an outrageous bill due at the end of the month.
Service credit, on the other hand, is the agreement you make with a service provider such as a utility company, cell phone or internet service provider. Even though many consumers may not think of these services as an extension of credit, they are, but they may or may not report to credit reporting agencies or appear on your credit report.
When you apply for a mortgage or car loan, this is known as an installment loan or credit. With this type of loan, you borrow money from a lender, and are then responsible for repaying the money in regular installments, typically with interest or finance charges, for a specified amount of time.
What Is Considered a Good Score
According to consumer credit reporting agency, TransUnion®, there is no single "good" score, but there are various factors used to determine a borrower's credit worthiness. Because each credit reporting bureau determines and calculates credit scores differently – and every lender or creditor looks for different things on someone’s report – the answer is not so cut and dry. To make matters more complicated, creditors may not report everything to all bureaus, resulting in each of the three reporting bureaus having different credit scores for you.
The two most popular scoring models, FICO, or Fair Isaac Corporation, and VantageScores, both use a sliding scale ranging from 300 to 850. This three-digit score determines your risk to lenders, and generally speaking, the higher the score, the better. For example, with TransUnion, the highest score of 850 is considered excellent, while scores in the range of 700 to 749 are considered good. If your credit score falls between 658 to 719, then it is considered average or fair, as it puts you right in the middle of the average consumer credit score rating. It is worth noting, however, that lenders may judge your credit rating differently, depending on the type of loan or credit for which you’re applying. A score above 700, for most mortgage lenders, is considered very good, and will result in you obtaining more favorable loan terms and interest rates.
How Can I Get My Credit Score Up?
If your credit score is a bit lower than you’d like, your first step to getting it up is ordering a credit report from each of the three reporting bureaus: TransUnion, Experian® and Equifax®. Consumers are entitled to one free credit report, from all three agencies, per year. Although, this report will not detail your actual score, you will find out about any negative entries you may have. Once you know what you’re up against, you can take the necessary steps to address each negative item. If you notice any discrepancies or errors, contact the reporting bureau and dispute the inaccuracy. Discrepancies, no matter how small, can negatively impact your score, and are worth taking the time to dispute. The Federal Trade Commission’s website has more information, including appropriate steps to take, as well as a sample dispute letter to help you out.
How To Get My Credit Score Above 700
When you want to get your credit score above 700, you must use the credit given to you responsibly to demonstrate that you’re creditworthy by maintaining positive accounts. After you’ve taken care of all negative items on your report, you need to have open accounts and lines of credit that report to the credit reporting agencies. Without open lines of credit on your credit report, you cannot prove to lenders that you are, indeed, worthy of credit. It may seem counterintuitive, but to improve your credit, you need to have and use credit. Paying bills on time, being mindful of balances and credit utilization will go a long way. Showing that you can use credit given to you responsibly will help get your score above 700 and beyond.
Other Credit Tips
The best tip is to be patient. While you can hire a third party to deal with creditors and dispute negative lines on your credit report, you can also do this yourself and save some money. Rome wasn’t built in a day, and neither will your credit score skyrocket quickly. If your credit is poor, you can apply for a secured credit card. Secured credit cards function in many ways like their unsecured counterparts, however, they are guaranteed by a mandatory deposit, which is determined by the financial institution. Usually, this deposit is equal to the amount of your credit limit, but the account is reported to the credit bureaus monthly. This is a relatively easy and fast way to increase your credit score, as long as you are responsible with its usage.
- Experian: What is Credit
- TransUnion: What’s Considered a Good Credit Score?
- myFICO: How to repair my credit and improve my FICO Scores
- Experian: How Do I Get My Credit Score Above 700?
- Federal Trade Commission: Disputing Errors on Credit Reports
- Credit Karma: Credit card utilization and your credit scores
- myFICO.com. "What Is a FICO Score?" Accessed July 23, 2020.
- myFICO. "What's in my FICO® Scores?" Accessed Aug. 24, 2020.
- Federal Trade Commission. "The Fair Credit Reporting Act," Page 22. Accessed July 23, 2020.
Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.