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In 2020, the average FICO® Score☉ in the U.S. reached an all-time high of 711, according to Experian data. Achieving a credit score above 700 is a good step toward qualifying for loans and credit cards when you need them—and with better terms and lower interest rates.
A score above 700 could be particularly helpful if you're hoping to buy a home. The typical credit score for mortgage borrowers increased to 786 in 2020, according to the New York Fed. Getting your credit score above 700 will give you a better chance of approval when it's time to apply for a mortgage.
You can work to get your credit score above 700 by practicing good credit habits, including checking your credit score and credit report regularly, and taking steps to address potential credit issues.
Why Do I Want a Score Above 700?
A good credit score ranges from 670 to 739, according to FICO®, the scoring model used most by lenders. That means working toward a credit score above 700 can make your life easier and help improve your finances.
Having a good credit score is important for several reasons. Lenders look at your credit score to determine how likely you are to pay back your debts on time. The higher your score, the more favorable the offers you are likely to receive from lenders, including higher dollar amounts at lower interest rates on loans, higher credit card limits and lower APRs on those cards, and access to more financing options.
A good credit score can make a significant difference in the long run because lower rates can spell big savings. That's especially the case on longer-term loans, such as auto and mortgage loans, where even a small difference in interest rate can save you thousands of dollars over the loan term.
Building good credit can also help you qualify for lower auto and homeowners insurance rates and can make it easier to secure a housing lease or even certain jobs. As such, it's a good idea to work to improve your credit even if you're not planning a major purchase.
How Can I See the Factors Impacting My Score?
There are five different factors that influence your FICO® Score, each weighted to prioritize your payment history and debt balances.
Credit monitoring services, such as Experian's free credit monitoring tool, can give you valuable insight into each of these credit score factors and how they affect your credit history. You'll be able to pinpoint certain areas and find out which steps you can take to improve your situation.
How to Bring Your Credit Score Above 700
There are several steps you can take to improve your credit score. Here are some of the best ways.
Pay on Time, Every Time
Your payment history is the most important factor in determining your credit score. Making on-time payments every month is crucial to getting your credit score above 700. If you have some late payments on your credit report, it may make it more difficult to build your credit score. But over time, new positive information can outweigh old negative information.
In addition to paying all your current and future bills on time, make it a goal to get caught up on past-due debts so you can stop them from damaging your credit further.
Reduce Your Credit Card Balances
How much debt you have is a factor in your credit score. But for the most part, the "Amounts Owed" section deals with your credit utilization ratio, which is the percentage of your available credit on credit cards and other revolving credit accounts that you're using at a given time.
For example, a $2,500 balance on a card with a $5,000 credit limit gives you a 50% utilization rate on that card. Generally, it's best to keep your utilization under 30% for each card and across all your credit card accounts; for top credit scores, try to get utilization down into single digits.
A high utilization rate signals that you're relying too heavily on credit and could have a difficult time making your monthly payments. So work on paying down your credit card balances and keep them low relative to their credit limits.
Avoid Taking Out New Debt Frequently
The longer you manage your credit responsibly, the better it reflects in your credit score. It's also important to avoid opening new accounts frequently.
That's because FICO® considers the average age of your accounts. If you've had one credit card for 10 years, for instance, and another for five years, the average age of those accounts is 7.5 years. When you open a third credit card, though, it drops that average age to five years.
If you open credit accounts frequently, it will push your average account age down, which could hurt your credit score instead of helping it.
Also, virtually every time you apply for credit—whether you're approved or not—lenders will run a hard inquiry on one or more of your credit reports. Each of these inquiries typically drops your FICO® Score by fewer than five points, and that impact is usually temporary.
But if you apply for multiple credit card accounts in a short period of time, it could cause lenders to view you as a riskier borrower. As a result, multiple inquiries in a short period (not related to shopping around for a single loan type, such as a mortgage) can have a compounding negative impact on your credit score.
The bottom line here: Avoid opening new accounts unless you absolutely need them.
Be Mindful of the Types of Credit You Use
Lenders like to see that you're capable of managing multiple types of credit accounts. As a result, it can be good for your credit score if you have, say, a credit card, an auto loan, a student loan and a mortgage loan—as long as you're making all payments on time and keeping your credit card balances low.
Of course, in most cases, it's not a good idea to take out a loan simply to build credit. Also, FICO® confirms it's not necessary to have one of each loan type.
Dispute Inaccurate Credit Report Information
It doesn't happen often, but it's possible for your credit reports to contain inaccurate or even fraudulent information. If you find something that you don't recognize on your credit report from one or more of the three main credit bureaus (Experian, TransUnion and Equifax), you can dispute the item with the credit bureaus.
The dispute process typically takes about 30 days, and if the bureaus find your claim to be correct, they will remove or modify the disputed item, which could help your credit.
Don't Close Old Credit Cards
The length of your credit history is another factor that goes into your credit score calculation. Credit scoring models like to see a long history of managing credit accounts, especially with low balances.
Keeping old credit cards open, even ones you use rarely, can also help your credit score by increasing your amount of available credit. As long as you keep balances low, that extra available credit will help reduce your credit utilization and improve your scores. If you're not paying high annual fees on those older card accounts, keep them open and use them occasionally so the card issuer doesn't close your account due to inactivity.
Be Diligent About Monitoring Credit
The process of building a credit score to 700 and beyond doesn't happen overnight. But there are some steps you can take now to get there faster.
During this process, it's important to monitor your credit regularly. With Experian's credit monitoring service, you'll get free access to your FICO® Score powered by Experian data plus your Experian credit report. You'll also get real-time updates when changes are made to your credit report, such as new accounts, new inquiries and new personal information.
As you check your credit regularly, you'll be able to see what's working and what isn't. You'll also be able to quickly spot items that could hurt your score and address them before they do any real damage.
As you keep track of your credit score and continue to develop good credit habits, you'll not only have a good chance of achieving your goal of getting above 700, but also a much better chance of staying there.