What Is a Good Credit Score?

Credit scores are like the numbers on the College Board exam — the higher your score, the more likely doors will open for you.

The nation’s three large credit rating agencies collect personal-finance data from numerous sources and weigh them using a formula to arrive at a number, called a FICO score, which comes on a scale of 300 to 850.

Any score above 750 tells the business world you’re an excellent risk and you can borrow money at the most favorable interest rates.

Numbers between 650 and 750 are a gray area – you’ll probably offered loans and credit, but probably not at the best rates.

Fall below 650 and you might find it difficult getting a loan or a credit line at an easily affordable rate.

The three credit-rating bureaus – Experian, TransUnion and Equifax – use their own methods for calculating scores, with results that aren’t identical, but are usually similar.

Key metrics are whether you are delinquent paying debts, the amount you owe, your payment history, the types of credit you have and the length of time in your credit history.

Rod Griffin, director of consumer education and advocacy with Experian, said the first step in improving your score is learning what the negatives are and taking steps to change them.

“Resolving those negative issues will result in the most rapid improvement,” Griffin said. “Will that result in a 100-point change in a month? That’s unlikely but not impossible. If you have poor scores to start with, it’s a bit more plausible than for a person with high scores.”

That’s because the closer you are to a perfect score, the fewer things you can do to change the negatives. Someone with a 750 score would need to become the perfect credit risk to add 100 points, while someone with a 450 might only need to pay some delinquent bills.

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The truth about raising your credit scores fast

While a lucky few may be in a situation where they can raise their credit scores quickly, the bottom line for most of us is that building credit takes time and discipline, especially if you’re trying to rebuild bad credit. That’s because your credit scores are complex and made up of several interconnected factors (more on that below).

So trust us: While some credit repair agencies may promise to raise your credit scores fast, there’s no secret that will help boost your credit scores quickly.

But if you start developing healthy habits now, you can build credit over time all by yourself.

5 factors that affect your credit scores

As we mentioned above, there are several factors that go into determining your credit scores.

  1. Payment history makes up the biggest chunk of your credit scores. That’s why it’s so important to make on-time payments each month if at all possible. Late payments can haunt your credit history for up to seven years.
  2. Credit usage, or credit utilization, is another important factor. This measures how much of your available credit you tap into at any given time. Experts recommend you keep this to less than 30%.
  3. The length of your credit history has some impact on your credit, though not much. This factors in the ages of your oldest and newest credit card accounts, as well as the average age of all your accounts. The older your credit, the better, because it shows lenders you have more experience managing credit.
  4. Your credit mix has a small impact on your credit. This looks at the types of credit you borrow. Lenders want to see that you can balance revolving accounts like credit cards with installment accounts like mortgages, student loans, auto loans and personal loans.
  5. Your recent credit also has a small impact on your credit. This tracks the applications you file for things like new credit cards and personal loans with hard inquiries. The fewer, the better.

Ask for late payment forgiveness

Paying on time constitutes 35% of your FICO Score, making it the most important action you can take to maintain a good credit score. But if you’ve been a good and steady customer who accidentally missed a payment one month, then pick up the phone and call your issuer immediately.

Be ready to pay up when you ask the customer rep to please forgive this mistake and not to report the late payment to the credit bureaus. Note that you won’t be able to do this repeatedly — requesting late payment forgiveness is likely to work just once or twice.

You have 30 days before you’re reported late to the credit bureaus, and some lenders even allow as long as 60 days. Once you have a late payment on your credit reports, it will stay there for seven years, so if this is a one-time thing, many issuers will give you a pass the first time you’re late.

How much will this action impact your credit score?

If you’re a day or two late on a credit card payment, you might get hit with a late fee and a penalty APR, but it shouldn’t affect your credit score yet. However, if you miss a payment by a whole billing cycle, it could drop your credit score by as many as 90 to 110 points.

If you fall 30 days or more behind, you can try sending a “letter of goodwill” or “goodwill adjustment” to the credit card issuer. In this letter, you’ll take responsibility for the late payment and request the issuer remove it from your credit reports. The issuer isn’t required to comply, but for a loyal customer with a good record, it doesn’t hurt to ask.

3. Pay Twice a Month

Let’s say you’ve had a rough couple of months financially. Maybe you needed to rebuild your deck (raising my hand) or had to get a new fridge. If you put big items on a credit card to get the rewards, it can temporarily throw your utilization ratio (and your credit score) out of whack.

You know that call you made to find out the closing date? Make a payment two weeks before the closing date and then make another payment just before the closing date. This, of course, assumes you have the money to pay off your big expense by the end of the month.

Take care not to use a credit card for a big bill if you plan to carry a balance. The compound interest will create an ugly pile of debt pretty quickly. Credit cards should never be used for long-term loans unless you have a card with a zero percent introductory APR on purchases. Even then, you have to be mindful of the balance on the card and make sure you can pay the bill off before the intro period ends.

5. Make the Most of a Thin Credit File

Having a thin credit file means that you don’t have enough credit history on your report to generate a credit score. An estimated 62 million Americans have this problem. Fortunately, there are ways to fatten up a thin credit file and earn a good credit score.

One is Experian Boost. This relatively new program collects financial data that isn’t normally in your credit report, such as your banking history and utility payments, and includes that in calculating your Experian FICO credit score. It’s free to use and designed for people with limited or no credit who have a positive history of paying their other bills on time.

UltraFICO is similar. This free program uses your banking history to help build a FICO score. Things that can help include having a savings cushion, maintaining a bank account over time, paying your bills through your bank account on time, and avoiding overdrafts.

A third option applies to renters. If you pay rent monthly, there are several services that allow you to get credit for those on-time payments. For example, Rental Kharma and RentTrack will report your rent payments to the credit bureaus on your behalf, which in turn could help your score. Note that reporting rent payments may only affect your VantageScore credit scores, not your FICO score. Some rent-reporting companies charge a fee for this service, so read the details to know what you’re getting and possibly purchasing.

A new entry into this field is Perch, a mobile app that reports rent payments to the credit bureaus free of charge.

7. Consider Consolidating Your Debts

If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay off all of them. Then you’ll just have one payment to deal with, and, if you’re able to get a lower interest rate on the loan, you’ll be in a position to pay down your debt faster. That can improve your credit utilization ratio and, in turn, your credit score.

A similar tactic is to consolidate multiple credit card balances by paying them off with a balance transfer credit card. Such cards often have a promotional period when they charge 0% interest on your balance. But beware of balance transfer fees, which can cost you 3%–5% of the amount of your transfer.

4. Dispute Credit Inquiries

Credit inquiries will affect your credit score for 12 months. But, you can dispute hard inquiries on your credit profile and have them removed, I wouldn’t try this until you have disputed more important account information first.

Call the credit bureaus to dispute inquiries. The creditor has to verify you authorized them to pull your credit. Inquires aren’t removed often, but I have seen some removed from credit reports before, so it’s worth a shot. 

What Factors Affect Your Credit Score?

Understanding what goes into your credit scores can help you start gaining points faster and build up a strong credit file. Here are the main factors that go into calculating your scores:

  • Payment history: Whether you pay your credit cards and loans on time accounts for 35% of your FICO® Score , the score most often used by lenders.
  • Credit balances: Credit utilization, or the percentage of your available credit that you’re using, makes up 30% of your FICO® Score. Keeping your balances under 30% of total credit available is key to maintaining a solid credit score; for top scores, aim to keep your utilization in single digits.
  • Length of credit history: The length of time you’ve had your credit accounts open makes up 15% of your FICO® Score. The longer you have your accounts open, the better.
  • Applications for new credit: Applications for credit cards and loans can cost you a few points each, and they impact your scores for a year. New applications account for 10% of your FICO® Score.

7. Have someone add you as an authorized user

When someone adds you as an authorized user on their credit card account the credit history of that account from day one will be reported on your credit report.

Authorized users can have their own card with their name on it to make purchases, but they don’t have to even get a card.  Make sure the account you are being added onto is in good standing. No late payments, low balance, and the longer it has been open, the better. Make sure you ask financially responsible people you know well to add you on as an authorized user cause if they become delinquent it will also hurt your score.

How Quickly Does Your Credit Score Update?

Unlike a lot of financial metrics, your credit score doesn’t tick away silently in the background, changing without your knowledge. Instead, it’s recalculated each time you or a business requests it. If you request it often, it’ll update more frequently. Most popular free credit score websites request this information every month; that way, you get a new score update every 30 days.

It also depends on how often the companies you do business with report your information. For example, if your credit card company doesn’t report your payments until the end of the month, you won’t see the impact of your payments on your credit score until then, even if you pay it off at the beginning of the month.

Check and understand your credit score

It’s important to know that not all credit scores are the same, and that they fluctuate from month to month, depending on which credit bureaus lenders use and how often lenders report account activity. So, while you shouldn’t worry if you see your scores rise or fall by a few points, you should take note when a big change occurs.

The two main consumer credit scoring models are the FICO Score and VantageScore. Here are the factors that comprise your FICO Score and how much each factor is weighed:

  • Payment history (35% of your score)
  • Amounts owed (30% of your score)
  • Length of credit history (15% of your score)
  • Credit mix (10% of your score)
  • New credit (10% of your score)

Here are the factors influencing your VantageScore:

  • Total credit usage, balance and available credit (extremely influential)
  • Credit mix and experience (highly influential)
  • Payment history (moderately influential)
  • Age of credit history (less influential)
  • New accounts (less influential)

There are a variety of options for checking your credit score for free.

For example, Discover cardholders can get a free FICO Score from the Discover Credit Scorecard, or anyone can get a free VantageScore by creating a LendingTree account. American Express and Capital One also offer free VantageScores to both card account holders and the general public, though many other card issuers offer free access only to their cardholders.

Here are the tiers that credit scores can fall into, according to FICO:

FICO Score tiers
FICO Score Rating
800 or more Exceptional credit
740 to 799 Very good credit
670 to 739 Good credit
580 to 669 Fair credit
580 or less Poor credit

Understanding credit scores

Your credit score, also called a FICO score, is a three-digit value ranging from 300 to 850. This number indicates how likely you are to repay your debt. This score is based on info in your credit report that comes from the three major credit bureaus: Transunion, Equifax, and Experian.

“Any score above 670 is considered very good. Anything below 600 is considered weak,” says Lou Haverty, a chartered financial analyst (CFA).

A higher score gets you access to better home loans. That’s very important when buying a home, says Gardner.

“For example, a high credit score borrower may be offered a 30-year fixed-rate loan at 4%” he says. “An average credit score borrower may be offered the same loan at 5%. On a $200,000 loan, the average-score borrower would pay $40,000 more in interest over the life of the loan.”

How to Monitor Your Credit Score

You can monitor changes in your credit scores for free by using CreditKarma.com or CreditSesame.com, which gives you free access to your non-FICO credit scores. Credit Karma updates your TransUnion and Equifax credit scores daily while Credit Sesame delivers monthly updates to your Experian credit score. If there are changes to either of those credit reports, you can see the subsequent credit score change using the free services.

Some credit card issuers give their cardholders a free FICO score on each month's billing statement. Discover, First National Bank of Omaha, and Barclaycard all offer free FICO scores each month. Capital One offers CreditWise, which is also free. Check with your credit card issuer to find out whether they provide free access to your credit score.

How Long Do Derogatory Marks Stay on Your Credit Report?

No one’s perfect, and that’s very clear when you’re dealing with credit scores and credit reports. Your credit report is a history of how you’ve handled credit in the past. If you’ve made mistakes, such as late or missed payments, those will stay on your credit report for a long time. But just how long depends on the type of derogatory mark: 

  • Late payments: Because lenders usually report to the bureaus every 30 to 45 days (roughly), you may have a small window of time after missing a payment to make it up before it appears on your report. But once a late payment is on your report, it will stay for seven years from the original delinquency date.
  • Collection accounts: If you have an account that is sent to collections, the account will remain on your credit report until seven years after your initial missed payment that led to the account ending up in collections. 
  • Bankruptcies: Depending on the type of bankruptcy you declared, it will remain on your credit report for seven to 10 years. 
  • Other negatives: Other derogatory marks, such as repossession, will typically stay on your credit report for seven years from the date of the first payment you missed. 

Is There a Quick Fix for Repairing Credit?

If you have negative items on your credit file, you might be tempted to work with a credit repair company for a quick fix.

Credit repair companies offer to “help” by saying they can remove negative items from your credit reports. They do this by taking over communications with your creditors or reporting agencies, and filing disputes on your behalf. You typically pay around $50 to $100 a month for this service. If an item on your credit report is correct, it cannot be removed by a credit repair company or anyone else. And the damage credit repair companies could cause to your credit, by requiring you to stop paying your bills, is substantial.

The truth is that building great credit takes time. Correct information, even if it is negative, cannot be permanently removed from your reports until it’s due to drop off, which generally takes seven to 10 years. During that time, the impact of negative information decreases and your scores can improve.

If you find incorrect information on your credit reports, the best solution is to file a dispute, which you can do for free, and it doesn’t require any help from a third party.

How Long Does It Take for Your Credit Score to Recover After Taking a Hit?

In order to understand how long it might take you personally to improve your credit, it can be helpful to look at one FICO study of the average amount of time it takes to recover your credit score back to its original number after a negative mark on your credit report.

This study was only done for mortgage payments, but it’s likely that it’d be similar for other types of negative marks, such as paying your student loans late or having a car repossessed if you don’t pay your auto loan.

Starting credit score of 680 Starting credit score of 720 Starting credit score of 780
30-day late payment 9 months 2.5 years 3 years
90-day late payment 9 months 3 years 7 years
Short sale, deed-in-lieu of foreclosure, or foreclosure 3 years 7 years 7 years
Bankruptcy 5 years 7-10 years 7-10 years
Note: Figures are approximations.

In general, the longer you forgo a payment you owe, the longer it’ll take to recover. And the higher your credit score was to begin, the longer it will take to recover. Know that there are things you can do to prevent this from happening and to build credit in the meantime.

How long does it take for your credit score to improve when you start paying student loans?

Your credit score could start improving immediately once you start making payments on your student loans, but most people should keep their initial expectations low. Like with any major loan, early student loan payments go more toward paying down interest rather than reducing the principal loan amount. Your overall credit utilization rate (a major factor in your credit score) will remain high until your payments significantly reduce your principal.

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