Is 700 a Good Credit Score?

Before we dwell into whether 700 is a good credit score or not, you need to understand what a credit score is. A credit score is a three-digit number that is derived on the basis of the statistical analysis of an individual's credit history.

The credit score determines whether you are eligible for loans such as automobile or housing loans and for a new credit card. The credit card companies also check the credit score before issuing a credit card. If you are planning to apply for a housing loan or a personal loan, the credit score will have a significant impact on the down payment you have to make and also on the annual rate of interest on the loan

Credit Score Scale

The credit score of an individual is calculated by three main credit bureaus. They are TransUnion, Equifax and Experian. Each bureau uses its own method or model to calculate the credit score.

One of the models that are very popular is the FICO credit-scoring model. Bill Fair and Earl Isaac founded FICO or Fair Isaac Corporation in 1956. They developed a system to measure the credit risk called FICO.

FICO scores are calculated taking into consideration various data of your credit report. The factors that are considered while calculating the credit score are payment history, credit history, type of credit, outstanding dues and bills and new credit if any. The FICO scale grades between the values 300 and 800. If you want to get a good rate of interest on your loan then you need to have FICO score of 720.

In the current economic scenario, is 700 a good credit score? Can an individual qualify for an automobile or a mortgage loan with this score? Is it possible to improve the credit score beyond 700? The answer to all these queries is yes.

If your credit score qualifies you for a loan with a favorable rate of interest, then you may say that the credit score is a good one. During an economic recession, the scale of the credit score will be shifted upwards. To put it more clearly, you need to have a very high credit score, when an economic crisis prevails, to qualify for a mortgage loan that too at a good rate of annual interest.

When the economy is booming, it is possible to qualify for a mortgage loan or an automobile loan at a good rate of interest with a credit score of 650. In such an economic situation, credit score of 700 can be considered as an excellent score.

However, in the current economic scenario the banks and the financial institutions have raised the qualification standards for any kind of loans. This is also applicable if you are applying for a new credit card. Hence, to qualify for a loan with a favorable rate of interest you need a credit score of 720 and above.

The credit score of 700 is neither bad nor outstanding, it is just an adequate score. So to qualify for a loan with low rate of interest you need to work on improving your credit score from 700 to 720 and above.

Tips to Raise Credit Score above 700

When you have an adequate credit score of 700, it means you have not missed out any of your bill payments and have handled your credit with care. You need to understand it is easier to raise the credit score from rock bottom than to raise the score from 700.

When you want to raise your credit rating from 700 to 720 and above, ensure that you always stay on top of your payments. Make an extra effort to pay all the bills such as utility and credit card bills on time; late payment or lapse of payment can result in a huge difference in your credit score at the time of raising the score.

Make extra payments on your credit card bills. When your credit balance on the credit card comes down the availability of credit increases and this will reflect in the credit report causing the credit score to go high.

Keep all the existing credit accounts active to show the longevity of the accounts in your credit report. Do not close any of the existing accounts. These minute things would be considered while raising the credit score.

Review the various types of credit accounts you have in your name. More importance is given to certain credit accounts compared to others. For instance, mortgage loan account is given more importance than the credit card account. If the mortgage loan account is well maintained it would help in raising the credit score.

Most of the people apply for a new credit account while trying to raise their credit scores. This is a grave mistake. Remember, when you are applying for a new credit account the concerned company would pull out your credit report to check the credit history. If there are too many inquiries for your credit report, it would affect the credit score. The credit score would come down.