Your credit score is more consequential than you may think. Aside from banks, it is checked by institutions beyond the lending sector. Companies that need to evaluate your creditworthiness, including insurance firms, landlords, and recruiters, may all draw conclusions from this indicator. A score of 700 puts you in the “good credit” category. It unlocks better conditions on loans, and the probability of rejection falls substantially. So, how can you achieve it?
If your current status is lower, you may be in the “poor” or “fair” category in the FICO system. The “good” segment includes totals between 670 and 739. According to Experian, consumers in this range are unlikely to become seriously delinquent — this happens to 8% of them. Just over a fifth (21%) of Americans fit this category.
Why Is Your Score Inferior?
The total is calculated automatically using the contents of reports compiled by three nationwide agencies. However, Experian, Equifax, and TransUnion can be wrong. You may end up lower on the scale due to different types of errors, from misspellings to mix-ups. This happens with around 20% of US citizens, according to the Federal Trade Commission. Mistakes justify credit repair — score increase through disputes. Check the Credit Saint review to see how this works.
You may also fail to get a good credit score due to irresponsible borrowing. Consumers who neglect their obligations under credit agreements see their status plunge. In this case, nothing can be repaired. Unless you rethink your financial habits, you cannot compensate for past mistakes. Gradually, their influence will fade, and they will eventually expire. Most negative data vanishes in 7 years.
Different scoring systems consider different aspects of your experience, but some universal rules exist. To have a positive reputation as a borrower, you should make all payments by the due date, use up to 10% of credit limits across all cards, apply for new services sparingly, and gain experience with different borrowing systems (mortgages, car loans, credit cards, etc.). Here are five tips for anyone who wants to get to 700.
If your score is unfair, you should begin by fixing erroneous reporting. Go to www.annualcreditreport.com to download copies of all three documents. Until April 20, 2022, you can do it for free every week. This is an emergency measure, as the service used to be available once a year. To obtain the files, you need to share basic information, including your Social Security number. This website is the only authorized source.
Next, scrutinize each document paying attention to every line. You may find accounts that do not belong to you, incorrect amounts, false information, expired details, etc. You may even suspect your score has fallen due to credit fraud. Any inconsistencies should be disputed.
Negative events in your history are known as derogatories. They reflect the failure to fulfill the terms of your agreements. For instance, you may find:
- late/missed payments;
- evictions, etc.
If such details are false, your score will jump automatically once they are deleted. Before initiating the procedure, find supporting evidence and draft a dispute letter. No single format exists, but you may consider the template provided by the Consumer Financial Protection Bureau. If you have multiple mistakes to remove, consider hiring a credit repair firm to avoid delays.
- Never Miss Another Payment
The timeliness of payments is the single most influential factor. It affects 35% of FICO and 40% of VantageScore. Avoid being late at all costs. Set up reminders or auto transfers to prevent delays. Lenders report skipped payments once they are 30 days overdue, so act fast if you are a few days late. Make the payment and contact the institution — they may agree not to share that slip-up with the bureaus.
If you find yourself in a difficult financial situation, negotiate. Do not wait for your payments to go into default. Communicate with the lender to work out a new payment plan. The institution may agree to provide restructuring or refinancing. Ignoring their demands is the worst choice.
According to some experts, 10% is the ideal utilization ratio. Someone with several credit cards giving $5,000 in total must have a balance of $500 across the accounts.
If you cannot afford to pay off the balances, extend the limits. Alternatively, get a new card from another issuer, or become an authorized user on someone else’s account. If you have a friend or family member with an excellent financial history, ask them for a favor. Their limit will be included in your utilization, so it will also push your score up.
Finally, consider this free online service from the bureau. It allows you to gain some points by adding more information to the records. Phone bills, utility payments and even an HBO subscription may all work in your favor. On average, consumers see their totals rise by 12 points. This is not a lot, but it may still close the gap between your current score and 700+.
These tips should help you get a higher score. How soon you achieve 700 depends on the starting point and the strategy. Repair takes months (between 3 and 6 on average). The time required for rebuilding also varies, as lenders communicate with bureaus based on their billing cycles. Sooner or later, you will be able to neutralize the damage caused by your past mistakes. Good luck!