Have you ever thought about what an excellent credit score is? How can you achieve it? It’s easy to practice certain habits correctly, including exercising responsible financial habits. These habits include making budgets, managing credit utilization, maintaining a healthy credit mix, and paying your debts on time. All it takes is better knowledge to scale your credit score from zero to excellent.
Is it worth having an excellent credit score? Obviously! Your credit score is a critical aspect of your financial life. It determines your creditworthiness and affects your ability to secure loans, obtain favorable interest rates, and even impact your insurance premiums. Among the various ranges, achieving an excellent credit score is a worthy goal that can bring numerous benefits.
Have you ever checked your credit score or thought about how you can better it? Let’s take a closer take at how you can achieve an excellent credit score and what it takes to make it considerable. This article will delve into excellent credit score ranges, the benefits of a perfect score, and how to get improve one.
What is an Excellent Credit Score?
An excellent credit score generally refers to a high score that reflects responsible credit management and a low risk of default. The most commonly utilized credit scoring model known as FICO score usually ranges from 300 to 850. A FICO score of 850 or above is considered excellent, although different lenders may have their definitions. A high credit score demonstrates your creditworthiness and financial stability.
Besides this, another admired scoring model is VantageScore, with innumerable models such as VantageScore 3.0 and VantageScore 4.0 using a 300 to 850 score range same as the base FICO scores. VantageScore considered 661 to 780 in the latest model as its good score range.
The main difference between the two is the scoring ranges. With VantageScore, it scores content from 300 to 850, and the factors considered for calculating the score are “less influential to extremely influential.” In contrast, in FICO, the factors determining the scale of the range are “Amount owned, Payment history, length of credit history, Credit mix, and new credit”.
What are the Credit Score Ranges?
The range for an excellent credit score can differ depending on the used credit scoring model. The two most frequently used credit scoring models in the United States are the FICO score and VantageScore. Here are the typical ranges for an excellent credit score in each model.
Here is a significant breakdown of the FICO credit score ranges:
- Exceptional: 800 and above
- Very Good: 740 to 799
- Sound: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
An excellent FICO score (800 or higher) demonstrates strong creditworthiness and a low risk of default to lenders.
Here is a breakdown of the VantageScore credit score ranges:
- Excellent: 750 and above
- Sound: 700 to 749
- Fair: 650 to 699
- Poor: 550 to 649
- Very Poor: 300 to 549
An excellent VantageScore (750 or above) indicates a strong credit profile and a lower risk to potential lenders.
It’s important to remember that the ranges provided are general guidelines, and individual lenders may have their criteria for what they consider excellent or desirable credit scores. Credit scoring models and their fields can evolve, so it’s always a great way to get informed about the specific scoring criteria used by the lenders you are dealing with.
Benefits of an Excellent Credit Score
- Easier Access to Credit: With an excellent credit score, you’re chances are high to be approved for credit applications, such as loans, credit cards, and mortgages. Lenders view individuals with excellent credit as low-risk borrowers, making them more willing to extend credit.
- Favorable Interest Rates: An excellent credit card score can achieve lower interest rates on loans and credit cards. Lenders offer better terms to borrowers who have excellent credit considering it proves they have a record of responsible financial behavior.
- Higher Credit Limits: Lenders are more inclined to offer higher credit limits to individuals with excellent credit scores. A higher credit limit provides more flexibility in managing expenses and can improve your credit utilization ratio.
- Better Insurance Premiums: Credit scores can impact insurance premiums for auto, home, or other types of insurance. An excellent credit score may make you eligible for lower insurance premiums since insurers perceive you as a responsible and low-risk policyholder.
- Increased Negotiating Power: When you have an excellent credit score, you have more negotiating power in financial matters. Whether negotiating favorable loan terms, obtaining lower interest rates, or seeking better credit card rewards, a strong credit score enhances your ability to negotiate better deals.
- Rental Opportunities: Landlords often consider credit scores when assessing rental applications. An excellent credit score makes you more bound to be approved for desirable rental properties.
- Employment Opportunities: Some employers may check credit scores as a point of the hiring process, particularly for roles that involve financial responsibility or access to sensitive financial information. An excellent credit score can help you stand out as a trustworthy candidate in these situations.
- Better Financial Security: Maintaining an excellent credit score reflects good financial habits, such as making timely payments, managing credit responsibly, and keeping debt levels in check. These habits contribute to long-term financial security and assure a solid financial foundation.
Also Read: How to get personal loan with credit score 600
How to Get an Excellent Credit Score?
Achieving an excellent credit score requires time, discipline, and responsible credit management. Here you can see some critical steps you can take to work towards a perfect credit score:
Pay Bills on Time
Consistently making on-time payments takes time to build and maintain a solid credit score. Late payments can negatively impact you, so make it a priority to pay all bills by their due dates, including credit cards, loans, and utilities.
Manage Credit Utilization
Keep your credit card balances low compared to your available credit limit. Aim to use at most 30% of your available credit to demonstrate responsible utilization. Keeping balances low can help improve your credit score over time.
Maintain a Diverse Credit Mix
A mix of various credits, such as credit cards, loans, and mortgages, can positively impact your credit score. It demonstrates your ability to manage various credit responsibilities. However, it’s essential only to take on the credit that you need and can drive responsibly.
Keep Accounts Open and Active
Length of credit history is essential to credit scoring. Avoid closing old credit accounts, especially those with positive payment history, as they contribute to the overall length of your credit history. Keeping tabs active and in good standing can positively impact your score.
Limit New Credit Applications
Frequent credit applications can raise concerns for lenders. Each credit inquiry can have a minor impact on your credit score. Be selective and avoid unnecessary credit applications. Instead, focus on maintaining and managing your existing credit responsibly.
Regularly Check Your Credit Report
Get your credit report removed from the three major credit bureaus, including Experian, Equifax, and TransUnion. Check for errors or inaccuracies that could negatively affect your credit score. If you find any discrepancies, dispute them and have them corrected.
Practice Responsible Financial Habits
Besides credit-related factors, maintaining overall financial health can positively impact your credit score. This includes having a budget, paying all financial obligations on time, and avoiding excessive debt.
Conclusion
Striving for an excellent credit score is a worthwhile endeavor that can provide significant financial benefits. By understanding the factors influencing your credit score and implementing responsible credit management practices, you can achieve and maintain an excellent credit score over time. Building a solid credit history takes time, patience, and disciplined financial habits, but the rewards are worth the effort.
