A credit score is like a report card. It evaluates your financial performance over time and provides lenders with an indication of how reliable you are in handling your finances. When we were kids, getting our report cards or evaluation reports was nerve-wracking.
You want to do good and pass every class with flying colors. That is the same way most of us feel about our credit reports. It’s like a grade that lets people and businesses know if you have borrowed money in the past and paid it back.
We want to see a good grade on a credit report. Life is easier financially when our credit history isn’t marred with late payments, going over available credit, or defaulting on accounts. You want to show that you have a low credit utilization ratio.
A good credit score gives you an excellent reputation in the financial world. That good standing will open more doors for you in the long run.
The top way to safeguard your retirement is to open a precious metals IRA. Check out the below providers and request a free kit.
Best Overall Rating (Where I Invested)
#2 American Hartford Gold
Best Buyback Program
#3 Augusta Precious Metals
Most Educational ($50,000 Minimum)
#4 Noble Gold
Best Metals Selection
What Will I Learn?
- Credit Scores—What Are They?
- How Is Your Credit Score Calculated?
- Reap the Benefits of a High Credit Score Range
- How to Get an Exceptional Credit Score
- The Bottom Line
Credit Scores—What Are They?
A credit score is a numerical representation of your creditworthiness. It is calculated by considering a variety of factors, including payment history, amounts owed, length of credit history, types of credit used, and overall credit utilization.
The higher the credit score, the more likely an individual is to be approved for a personal loan or line of credit. An 800 credit score will work in your favor. Lenders pay close attention to credit scores to determine not just approval, but also the interest rate that will be charged.
Having a good credit score is also important for other purposes, such as renting an apartment or getting a job. It is essential to understand how credit scores are calculated and what to do to improve them.
How Is Your Credit Score Calculated?
Your credit score is one of the most essential measures of your creditworthiness. Credit is measured with the (Fair Isaac Corporation) FICO credit scoring system. The FICO score is three numbers that range from 300 to 850. Your credit score range is based on metrics established by Fair Isaac Corporation.
These ranges are dependent on the credit scoring model that credit bureaus use. Usually, credit scores between 580 and 669 are deemed fair, while scores between 670 and 739 are good. Numbers between 740 and 799 are very good.
Finally, any score between 800 and more is considered an exceptional credit score. Going above an 800 credit score up to 850 is the perfect credit score possible.
When you understand what affects your credit score, you can take action to improve your credit report, possibly achieving an 800 credit score and boosting your credit portfolio.
Listed below are the factors on which your credit score is based. Taking those factors into consideration can help you avoid lower credit scores.
This is 35% of your credit score. It considers on-time payments, frequency of missed payments, how many days are overdue to pay bills, and how recently payments were missed. Credit card issuers pay attention to your payment history.
The total owed on credit cards and loans accounts for 30% of your credit score. This is decided by the total amount you owe, the types and number of accounts you have, and the sum of money in arrears compared to how much credit is available.
Length of Credit History
The age of your credit history is 15% of your credit score. If you have a long history of making on-time payments, your score will be higher. The FICO score model commonly considers the average age of your credit when factorizing credit history. Therefore, keeping your accounts active is recommended.
Types of Accounts
Your account type is 10% of your credit score. A good combination of accounts, including home loans, installment loans, and credit cards, may help boost your score.
Recent activities make up another 10% of your credit score. Opening multiple accounts or applying to open might give lenders the impression that you’re in financial trouble, which may lower your score. However, scoring systems are designed to recognize that loan activity doesn’t mean a customer is risky.
Reap the Benefits of a High Credit Score Range
An excellent credit score will work in your favor. Higher scores can make it easier for you to get a personal loan or get qualified for lower interest rates and higher credit limits. Aiming for an 800 credit score or higher is the way to go. Exceptional credit scores bring you several benefits, which are listed below.
Get Lower Interest Rates
When lenders recognize that you are a responsible borrower, they might offer lower interest rates on personal loans, car loans, and more.
Higher Credit Limits
Having an 800 credit score or more proves that you are financially creditworthy. Lenders are likely to grant you more money. You can apply for a higher credit limit on your current credit card to increase your credit line.
More Purchasing and Negotiating Power
Having an 800 credit score may mean you have a long credit history. High credit scores will impress lenders, so if you’re looking for a home or car loan, you can get pre-approved or pre-qualified faster and easier. With pre-approval, you have the power to negotiate on the price of a car or real estate.
How to Get an Exceptional Credit Score
Is it possible to attain the highest credit score of 850 or an 800 credit score? If you work toward it, yes, it’s possible. Good credit habits will make it easier for you to get things, such as personal loans, and increase your total credit limit. There are actions you can take to improve your credit score.
Check Credit Report
The first step to improving your credit score is to check your credit report. You can get a free copy of your report from credit bureaus. Make sure all your information is correct and up-to-date. If you find any errors or discrepancies, contact the credit bureau to have them corrected.
Pay Bills on Time
Paying your bills on time is one of the most significant factors in determining your credit score. Make sure your monthly payments are paid in full without delay every time.
Limit New Credit
Opening new lines of credit can lower your credit score. Avoid opening new credit cards and other types of credit unless absolutely necessary.
If you are struggling to pay your bills and manage your debt, you can get help with creating payment plans. Financial experts can help you better understand credit scores and measures you can take to improve them.
The Bottom Line
An 800 credit score or higher means you have excellent credit. With this reputation, lenders and other financial agencies are more willing to work with you.
You will be eligible for better credit offers with more rewards. It’s important to achieve and maintain a good credit history so you can reap the benefits of credit score over 800 or higher.