The importance of a high credit score is not hidden from anyone. But even though a high credit score is considered a prime example of your financial acumen, not many people understand the true meaning behind it.
To put it simply, your credit score is a cumulative assessment of how you manage your financial responsibilities and fulfill your obligations. When lenders, landlords, or employers look at your credit score, they can quickly determine if you can be trusted with their assets or their image. This makes it important for you to maintain a high credit score.
In order to help you learn more, here’s a quick overview of high credit scores, their benefits, and the path to unlocking them for yourself.
What is a high credit score range?
If you have looked into credit scores before, you may already know that they are calculated in one of two ways: the FICO® score and VantageScore®. While VantageScore® has gained popularity in the past few years, the FICO® model is more popular. Both models now use a range between 300 and 850, with a FICO® score of 670 and above and a VantageScore® of 700 and above being considered good. These scores come in handy when you are in the process of renting, applying for credit, looking for employment, or buying insurance.
What are the benefits of a high credit score?
There are several benefits to maintaining a high credit score, which starts at 670 for FICO® or 700 for VantageScore®, which falls within the good, very good, and excellent ranges. When the 3 credit bureaus report your credit score as being in these ranges, you can unlock many advantages, including but not limited to the following:
- Lower interest rates.
- Reduced monthly payments.
- Better credit card rewards.
- Improved financing deals.
- There are higher chances to get approval on rental applications.
- Better insurance rates.
If you want to improve your credit score, you can reach out to a financial advice platform to receive guidance on how to move forward. Otherwise, you can also follow popular tips to achieve this goal.
How Do You Improve Your Credit Score?
You can improve your credit scores by following simple but effective practices. These include the following activities:
Stay up-to-date on your payments
Similar to preparing for tax season once a year, you need to be ready to make your loan and credit card payments every month. This is the easiest yet most impactful way to improve your credit score in the long run.
Use only a portion of your credit limit
No matter how much credit you have, you should use less than 30% of it every month. This keeps your credit utilization rate low and indicates that you are financially responsible. You can use solutions like a couples budgeting app to meet this requirement.
Get a higher credit limit
If you have trouble lowering your credit utilization, you can get a higher credit limit for your existing credit cards and lines of credit. This helps you immediately lower your credit utilization ratio. But it still calls for you to have a plan for making payments on time.
Introduce Variety to Your Credit Mix
A good credit mix has at least one installment credit product, like a loan, and one revolving credit product, like a credit card. This can help you improve your credit score by showing that you can handle different types of accounts without letting them burn you out.
Don’t Apply For Loans You Don’t Need
When you apply for credit, it creates a “hard inquiry” on your credit report that lowers your score for up to 1 year and stays on your report for up to 2 years. That’s why you may want to try putting some money away in an online bank account for sudden expenses instead of turning to additional loans.
By following these suggestions, you can find an easy way to improve your credit score. This can lead you to enjoy all the rewards of a high credit score, but without adding massive stress to your plate.
