Having good credit is more important than ever due to lingering inflation, higher interest rates, and layoffs. A good credit score, defined as 670 or above with the FICO credit model, is crucial for qualifying for the lowest mortgage rates, lower credit card interest rates, and more.
Potential lenders are more likely to approve someone with a 700 credit score than a 550 credit score. According to experts, having a credit score of 620 may get you approved for a mortgage, but it will come with the highest interest rates, resulting in significantly higher mortgage payments.
To improve your credit score and surpass the 700 mark, experts recommend taking specific steps. Paying bills on time is crucial, as your credit report reflects your payment history regardless of any unforeseen circumstances like layoffs or illness.
Making only the minimum payment each month ensures timely bill payments but does not contribute to credit score growth, especially if you carry a balance from month to month. Paying off your credit card balance monthly demonstrates responsible credit usage and positively impacts your credit utilization, a key factor in determining your credit score.
If you are already in debt or carrying a balance, experts advise against seeking additional credit. Instead, focus on paying off existing debts and improving your credit utilization ratio.
Experts emphasize the importance of daily credit management practices, such as timely bill payments, monitoring credit utilization, and reducing debt. Regularly checking all three credit reports every quarter allows you to identify and correct any errors that may impact your credit score.
Think of your credit report as a reference for your financial responsibility, similar to job references when applying for employment. By maintaining good credit habits and staying informed about your credit status, you can work towards achieving a credit score above 700 and accessing better financial opportunities.
