Is 700 a Good Credit Score?
A credit score is not something trivial that you can simply overlook. It is crucial to one’s financial stability and without money, what good can we do? A credit score is what you can safely present to a potential lender or lending institution when you need to borrow money. Thus, it is a credit score that helps you prove your creditworthiness through a numeric value.
Bear in mind that if you repeatedly default on making payments on borrowed money, this will reflect on your credit score, and for as long as you keep defaulting, the score keeps dwindling. A low credit score does not serve you well. Here’s a detailed picture that we have captured for you in order to understand credit score, range and whether or not 700 is a good score.
Why Do You Need Credit Score?
You’d be surprised to know just how essential a credit score is to build an overall profile. In the simplest terms, a higher credit score means you can borrow more money at reasonable interest rates. On the contrary, a low credit score lets you borrow less while incurring higher borrowing costs. A credit score is required for the following reasons:
Loans can be of many categories, each one serving its own unique purpose. You might need money for investing in a startup, spending on a destination wedding, buying a new car, or buying inventory for your business. Whatever the requirement, a loan does not come by easy.
If you are requesting your local bank to lend you money, they are definitely going to assess your creditworthiness to assure them that you will honor all your payments. This assessment can be done with the help of a credit score. Your credit report will allow the lender to decide whether or not the loan must be approved. A bad credit score can lower your chances of loan approval.
This is not all; even when you manage to acquire loan approval with a low credit score, you are not guaranteed to be met with lower interest rates. Interest rates are generally higher for those with low credit scores as compared to borrowers who have good credit. A higher interest rate makes it all the more difficult to pay off the loan.
Insurance makes an enormous portion of the overall expenditures that the average person incurs on a monthly/yearly basis. There is health insurance, life insurance, homeowner insurance and auto insurance to name a few. Your credit score can have a major impact on the amount of insurance that you will be required to pay. Credit rating has a correlation with any and all future accidents and claims, and this may result in higher premiums that would compensate for a lower credit score.
As far as home loans are concerned, you might need a credit score of 600 or above in order to get a home loan approved by the bank or the local loan office. Home mortgages are based on long-term commitments that can span for more than 25 years, so the lender cannot possibly take on a challenging customer on their books for a commitment this long.
The bank needs some sort of guarantee that you can handle mortgage payments. This guarantee comes with a good credit score. The rules have become even more stringent for mortgage loans after the collapse of the housing market back in 2008.
Now, you might have an idea about how a credit score is useful and without one, you may be faced with some major repercussions, but how is it calculated?
Determinants of Credit Score
Credit reporting agencies, also commonly known as credit bureaus, have been given the responsibility to calculate the credit scores of individuals. These companies collect information regarding an individual’s financial behaviors based on their purchase history, credit/debit card usage and loans that may have been issued in the past.
Credit reporting agencies work closely with other companies to gather all this information so that they can have complete information about the following:
- Money that you have borrowed from banks and other financial institutions
- The amount that you owe
- Whether or not you have successfully repaid the previous loans
- Whether or not you make timely payments
Using all this information, the agencies use FICO software to come up with a credit score for you. This score is a true reflection of one’s ability to meet credit agreements. More information on what is considered a good or bad score will become part of the discussion in the paragraphs that follow.
Range of Credit Scores
The credit score issued by Fair Isaac Corp. is generally referred to as the FICO score and this can be calculated for a range of 300 to 850, whereby 300 is considered poor and 850 an ideal score. A detailed analysis has been given below:
Bad Credit Score
300-649 is generally considered a bad credit range. You are most likely to be tagged ‘highly risky’ if you fall somewhere between 300 and 649, and lenders will definitely give you a hard time. You are most likely to incur higher interest rates with a credit score that fall within this range.
Fair Credit Score
Anything between 650 and 699 is considered a fair credit score, especially because the average FICO score in America during 2015 was estimated to be 695.
Good Credit Score
For a good credit score, aim for somewhere between 700 and 749, and you are most likely to bring down the approval barrier with a good credit like this. A good credit score can get your loans approved, but there’s no guarantee whatsoever that the interest rates will be low as well.
Excellent Credit Score
If you are planning on getting a mortgage, you must aim for something above 750 because anything over and above this score fairs as being excellent. You will not only be getting loans approved, but you are also most likely to get the best deals when it comes to interest rates and credit terms.
What Does a 700 Credit Score Mean?
As already established, a 700 credit score falls in the good credit score range. However, be mindful that anything slightly below 700 could land you in a completely different situation. A 699 score is considered fair, and credit terms and interest rates will substantially differ with a credit score of 699 and 700, so one point can make all the difference in the world.
A good credit score means with 700, you can get some of the best deals in terms of interest rates and loan. A few more details regarding how you can manage all this with a credit score of 700 has been laid out in the paragraphs that follow.
How to Get a Car Loan with a 700 Credit Score?
Acquiring a car loan can be daunting, but a good credit score helps you achieve this with minimal effort. People with a 700 credit score are generally offered some of the best rates when it comes to car loans. This is essentially because your car loan interest rate depends majorly on the following factors:
- Size of down payment
- Choice of car
With a 700 credit score, the lender is more likely to be interested in your payment history. An excellent payment history qualifies you for applying for an auto loan without having to fret upon whether your score suffices or not.
However, when you apply for an auto loan through the bank, a credit score of 700 may not be all roses and sunshine. When applying through the bank, you are required to present a credit history as well as an employment history. Falling short on either of them can end up being unfavorable for you.
Moreover, in order to obtain a car loan, you must fulfill the following requirements:
- Stability in employment and residence
- Good credit score of the cosigner
- Willingness of the cosigner on the loan
- Proof of the cosigner’s ability to pay
hence, if you are out looking to borrow money for a new car, make sure you have sufficient credit history and employment history that allows you to acquire an auto loan. If not, you might not be extended favorable interest rates, to say the least.
How to Get a Mortgage with a 700 Credit Score?
With a credit score of 700, you are considered among the prime borrowers who can enjoy an interest rate that is 0.25 percentage points higher than borrowers with a credit score of 760, the excellent category. The excellent range falls into the ‘super prime’ category that is provided even lower rates on mortgages.
When you are looking for a mortgage loan to buy a new house, you can improve your score even more before applying for the mortgage. Here’s what you can do:
- Pay down balances on your credit card. Anything in excess of 30 percent of your credit card limit can bring down your chances of acquiring a home loan. If you keep this balance down, you can stimulate a higher credit score eventually and apply for better mortgage interest rates.
- In order to qualify for a larger mortgage, you can pay a pending loan on your credit report. You must assess how much each payment can impact the maximum loan amount and through this, you can determine how much to borrow in the mortgage.
- If you are planning on getting a mortgage, do not open any new accounts. Avoid applying for credit cards and taking out auto loans as well if you are to maintain the existing score of 700 and would like to attract lower interest rates on this mortgage.
Reducing your credit score right before getting a huge mortgage is a bad idea, which can become a source of regret later. If you are planning to acquire a home loan, avoid applying for other sorts of loans that could ruin your chances of having the best interest rates with a score of 700 or above. Thus, plan your loan requirements accordingly and rationally.
How to Get Personal Loans with a 700 Credit Score?
In addition to obtaining a home loan and auto loan with an exceptionally good credit score of 700, you can also choose from a range of personal loans to meet your funding requirements. These few companies offer personal loans to consumers that have a credit score of 600-700.
You can obtain as much as $40,000 in a loan from Lending Club. The APR requirements are not too stringent with a rate of 6.16 to 35.89 percent being offered. Lending Club lets you borrow money for 36 to 60 months with an upfront fee based on your creditworthiness. It helps you with processing a loan with a simple and quick application process, and you can see your rate with a soft credit pull.
With Avant, you can take out loans ranging from $2000 all the way up to $35,000 with zero prepayment fees. With an upfront fee of 4.75 percent and an APR range of 9.95 to 35.99 percent, you can see your loan option with a soft credit pull. Enjoy fixed terms and fixed interest rates with Avant loans with a credit score of 700 or less.
You can get up to $35,000 in cash from FreedomPlus in no more than a single day. With its quick processing and zero prepayment charges, FreedomPlus performs a soft credit pull that keeps your score unaffected. It offers an APR of up to 29.99 percent but caters to the needs of those with lower credit scores, which is the 600 range.
Marcus by Goldman Sachs
This company offers personal loans for up to $40,000 for debt and credit consolidation. It offers an APR range of 6.99 to 24.99 percent coupled with zero origination and late fees. It extends you a wide range of repayment terms for a borrowing period of 36 to 72 months. You can also check out rates with a soft credit pull at Marcus.
Then there is Best Egg willing and able to offer personal loans up to $35,000 to those with a credit score of 700 or below. It offers an APR range of 5.99 to 29.99 percent and an origination fee of 0.99 to 5.99 percent. You can see the rate with a soft credit pull and can acquire fast funding through its quick and simple application process.
Thus, if you have a credit score of 700, you can make your way into a range of personal loans using the services of a few of these companies mentioned here.
How to Improve Your Credit Score – Useful Tips!
A 700 credit score can get you all this, but you can improve your score and get even more benefits. You can achieve an excellent score with the following tips.
Keep Your Credit Card Balance Low
The simplest method of obtaining a good credit score or escalating your score is to keep your credit balance low. If you are using multiple credit cards, you can simply consolidate them with a personal loan to give your credit score a boost from 700.
In case of multiple credit cards, you might have smaller balances outstanding on a few of these cards that you might be ignoring for the time being as they seem trivial. However, paying off all these small balances can impact your credit score substantially. This is how you can keep a clean credit report by getting rid of these insignificant balances all at once.
Leave Old Debt on Your Credit Report
Old debt on the credit report is not necessarily bad. Negative items can impact your credit score in a bad way, but the same is not true for good debt. If you have paid and settled your old debt on time, this can be favorable for your credit score. The longer this good old debt remains on your credit history, the better it is for your credit score.
Thus, what you can do in order to escalate your credit score from 700 is to keep old and good debt on the report for a long time by keeping the accounts active for as long as you can. This will be beneficial if you have had a strong repayment record that you’d like to show lenders for all future loan and borrowing opportunities. A good debt makes for a good credit history.
Pay Bills on Time
You can improve your credit score and take it from 700 to an excellent score range by ensuring timely payments. This is simple and the least convoluted method; you can make simple monthly payments and maintain a flawless credit record.
If you are in the habit of missing out on payments simply because you forget when a certain payment is due, set up automatic payments and relieve yourself.
Check Your Score Regularly
This is another method through which you can essentially improve your credit score. Here’s what you are required to do – keep a close eye on your score and never lose sight of it. If you can monitor your credit score, you can adopt a habit of managing your credit.
Plus, it will allow you to keep a close check to see if there are any potential errors in the report. A credit repair may then be initiated to combat these errors that could eventually impact your score.
You can check your credit report as and when required via soft inquiry. Otherwise, for a detailed overview, you may file a request with the credit agency and review your credit report. Learn from all that impacts the score negatively and avoid making similar mistakes in the future.
Increase Your Credit Limit
This is not a tip that all individuals can use. However, if you have a good credit score such as 700, you can improve it further by increasing your credit limit. With a higher credit limit to use, you are essentially increasing your credit utilization rate. This rate represents the amount of available credit, so a higher credit translates into a lower rate of utilization. This is a favorable situation for the credit score.
Use a Credit Card for Small Purchases
The idea behind this tip is to make smaller purchases using the available credit in your card and then try to pay off these smaller balances in time. These timely payments will fare well on your credit report and improve your credit score.
This falls under the category of managing credit cards in a responsible manner – not using up credit as quickly as possible but using just enough and paying it off in time. This simple drill can prove to be quite an effective strategy toward an improved credit score.
Avoid the Rate Shopping Window
Whenever you are trying to open a new line of credit for a new car, student loan or home mortgage, keep an eye out for the rate shopping window. FICO scores do not take into account loan inquiries made 30 days prior to issuing the score report. If you fall into this 30/45-day window, you can make sure these inquiries do not become part of your score report, thereby having no impact on your current score. This is not a permanent solution but a quick tip that can buy you some time.
If you have a good credit, you ought to be more careful with maintaining a good score. If you are consistent in your good financial habits such as paying on time, avoiding bankruptcies, keeping your debts to a minimum, reviewing your credit score periodically and managing your credit card balances responsibly, you can maintain and improve your score from 700 to enter the excellent score range in no time.
Apply for New Accounts Only If Necessary
If you are not in need of more credit, there is no need to open new credit accounts unless deemed necessary. When you take on unnecessary credit, it can hurt the credit score such that you will be faced with hard inquiries on the report. Plus, with more credit, you are more likely to indulge in overspending and accumulating debt, which could have been avoided.
In addition to this, you can keep your unused credit accounts active, even if you do not intend to use them. These accounts are added to the available credit, thereby reducing the utilization rate and keeping the score up.
Manage Debt in a Responsible Manner
Following from the previous point, you can manage your debt more efficiently by doing the following:
- Go for planned purchases rather than succumbing to impulse buying.
- Use credit cards only when you really need to, utilizing cash otherwise.
- Set up automatic payments as soon as you have sufficient cash, for instance, right after payday.
- Consolidate your debt with a balance transfer offer.
Keep an Eye Out for Fraudulent Activity
You are required to keep an eye out for potentially fraudulent activities that have been on the rise lately. This applies to any and all inconsistencies and inaccuracies on your credit report and even beyond.
If you sense some identity theft, report immediately. It has become common practice for imposters to use other people’s names to open new credit lines and use them up. This can be avoided by remaining alert at all times and keeping your personal and financial information safe and out of reach.
With the help of these simple yet effective tips, you can maintain a good credit score while taking baby steps to improve it even further. Bear in mind that these tips are not difficult to exercise and if followed religiously, you can improve your score by 100 points in no more than 30 days.
Frequently Asked Questions (FAQs) About Credit Scores
In this section, we will try and solve as many questions and queries there might exist regarding credit scores in general. Thus, if you have any remaining confusions, this section might help clarify a few or hopefully all of them.
1. What Is a Credit Score?
A credit score is a numeric value, primarily a 3-digit number, which is used by lenders and lending institutions to assess an individual’s creditworthiness. Based on this score, the bank or lending party decides whether or not the individual can repay the loan and whether they should be provided with a loan in the first place.
FICO score is the most commonly used score which ranges from 300 to 850, where 300 is considered poor and 850 is the optimal score that gets you the best deals. A higher score also improves your chances of getting loan approvals and vice versa.
2. How Is Credit Score Calculated?
A credit score is calculated based on five basic factors, and each one has a different weight assigned to it. These factors and their relative weights have been identified as follow:
- Credit history – 35 percent
- Utilization – 30 percent
- Length of use – 15 percent
- New application – 15 percent
- Types of credit in use – 10 percent
These factors are used by most credit scoring models, including FICO and VantageScore, the two popular names associated with calculating credit score.
3. What Is Meant by Credit Repair?
Credit repair is known as credit correction and refers to restoring mistakes in your credit report. It is very common to have come across a mistake, major and minor, on the credit report that is issued by a credit reporting agency or bureau. If you come across these mistakes and dispute them, the process is called credit repair.
Credit bureaus take as long as 30 days to verify such mistakes and then initiate a follow-up with the individuals who have disputed these mistakes. If you complete the credit repair process on your own, it will cost you minimal. If you end up involving an attorney to do this on your behalf, it would increase the cost, but it would also ensure that things are done correctly.
4. Is Credit Repair Legal in All 50 States?
As per federal law, an individual has the right to dispute any and all mistakes that appear on their credit reports. This makes credit repair fully legal, irrespective of where you reside. If you have chosen to involve a third party or legal representative to settle this dispute on your behalf, the attorney has to be licensed in your respective state of residence.
Credit repair becomes illegal only if whoever decides to represent you is not licensed in that state. This applies to any company that you choose to represent you. Without an attorney from the right state, you cannot dispute mistakes legally.
5. If I Close My Credit Card, What Impact Will It Have on My Credit Score?
Even once the account is closed, FICO formula will incorporate this account into the calculation of the utilization rate, which means that as soon as you have paid the outstanding balance in the account, your utilization rate and credit score will improve. However, as soon as the balance is paid in full, it will not be included in the calculation, thereby causing a nil effect on the credit score. In short, your credit score is impacted if a credit card is closed under the following conditions:
- It has an outstanding balance
- It has available credit
6. How Do I Improve My Credit Score?
You can aim to improve your credit score with the help of the following essential steps:
- Check your credit report and monitor it
- Make timely payments on all loan amounts
- Set up payment reminders if you have a weak memory
- Proactively try and reduce the amount of debt you owe
- Keep balance low on credit cards and other ‘revolving credit’
- Manage credit cards in a responsible manner
- Don’t temporarily close credit cards to artificially raise your score
In addition to these, you can try other ways to keep your credit score within a fair range and eventually improve it to a good and then excellent score over time.
7. What Is FICO?
FICO is an abbreviation for Fair Isaac Corporation that was founded in 1956. This company uses advanced math and analytics to aid business decisions. FICO score, also known as credit score, has also been one of the many inventions of this organization.
FICO scores are the most widely used credit scores when it comes to making lending decisions. FICO works closely with consumer reporting agencies to calculate and provide these scores. They are calculated with the help of specialized software that takes into account the various factors that make up a credit score.
8. What Are the Minimum Requirements to Produce a FICO Score?
In order to calculate the FICO score, the credit file must meet the following minimum requirements:
- At least one account that must be active for six months or more
- At least one account that must be reported to the credit reporting agency within the past six months
- There must be no indication of the deceased on the credit file of the individual
9. Why Are There Mistakes on My Credit Report?
There may be mistakes on your credit report owing to a few main reasons:
- Credit reporting agencies have to collect data from lenders, lending institutions and banks to incorporate them into the calculation of the score. All this information has to be fetched intermittently, but some of this could too burdensome. With the sheer volume of data, mistakes are commonplace.
- Change in addresses is another common mistake found in the credit report. The address provided for credit accounts may vary, which leads to errors being included in the credit report. Thus, if have been moving around a lot, you would encounter mistakes on your credit report if you haven’t already.
10. If My Spouse Had Bad Credit Before Marriage, Will That Impact My Credit Score?
If you have a joint account or have authorized use of your spouse’s credit, this will impact your credit score. Joint account holders must understand that the credit behavior of any one member can impact the other as well.
If your spouse or any family member has a separate credit account, it will not affect your score. However, you need to clarify this with the laws in your state because, in a few states, any debt acquired in a marriage falls under joint debt, irrespective of a separate or joint account.
11. Who or What Decides If I Can Get a Loan?
This decision is usually made by banks, credit card companies, auto dealers, retail stores and other such lenders. Credit card companies can summarize a consumer’s credit history and decide whether or not to lend money. However, this decision may be made with the help of a credit score issued by the credit reporting agency. This decision can never be made by a credit reporting agency.
12. What Is Meant by Credit Monitoring?
Credit monitoring is a process whereby changes in the credit are tracked. With the help of credit monitoring, you can build your credit and obtain a high credit score. If you opt for this service, you can receive alerts on any and all changes to your credit report and how these might impact your overall score. Credit monitoring is an essential practice if you are willing to improve your credit score by keeping your credit in check.
13. Can I Apply for a Credit Card If I Have a Bad Credit Score?
Yes, definitely. A few of credit card issuers have introduced credit cards especially for people who have bad credit scores. You can look up the best credit cards for scores ranging from 300 to 600 or beyond and choose one that suits you in terms of features and benefits.
14. What Are the Different Types of Credit Cards?
You can get your hands on any of the following types of credit cards depending on your needs and preferences:
- Standard Credit Card – The most basic of all credit cards is this one with a low APR but zero benefits. These are usually only used by people who are looking for financial flexibility.
- Credit Builder Credit Card – These high APR credit cards are generally used by people who have bad credit ratings. With a low credit limit, these cards are used to enhance the credit score by ensuring timely payments each month. Hence, you need to consider this one if you need to improve your score.
- 0% Purchase Card – As the name suggests, for all purchases made during a specified period of time, you can benefit from 0 percent interest. However, if you cannot pay back in time, higher interest rates await you!
- Rewards Card – Similar to cash-back credit cards, with the use of reward cards, you can achieve rewards by spending money such as loyalty points, travel discounts, coupons, and
- Store Card – This is what the Walmart credit card essentially is. On every purchase from the store, you can earn certain rewards.
If all of the above has not been sufficient to convince you that a credit score of 700 is good, you ought to try obtaining loans as a firsthand experience. A credit score of 700 is deemed good, and this can allow you to manage auto loans, mortgage loans and other personal loans from almost any company or bank.
Moreover, you can consistently work toward maintaining a good credit score and making all possible effort to improving it to get to the excellent score range by following the essential tips given here. Furthermore, if you have any confusions or queries regarding the many terms used within this text, an FAQ section has been laid out to help you through with questions related to credit score.
Hopefully, this is all you need to keep in mind the next time you are asked about whether 700 is a good credit score or not and what exactly you can do with it.