In general, the higher your credit score, the the better you are when getting a loan.
FICO scores, the most popular score, range from 300 to 850. A “good” score is usually above 670, an “excellent” score is above 740 and anything above 800 is considered “extraordinary.”
Once you reach the 800 mark, you will likely be approved for a loan and you may qualify for the lowest interest rate, according to Matt Schulz, LendingTree’s chief credit analyst.
There is no doubt that consumers are turning to credit cards because it is difficult for them to spend their money and there are many factors at play, he added, including. value of money. But personal loans depend on how well you manage your debts and the duration.
Getting an 800-plus credit score isn’t easy, he said, but “it’s definitely possible.”
Although that is considered “good,” the “extraordinary” score can open up better terms, which can save thousands of dollars in interest costs.
For example, borrowers with a credit score between 800 and 850 can lock in a 30-year fixed rate mortgage of 6.13%, but it jumps to 6.36% for credit scores between 700 and 750. On a $350,000 loan, pay the maximum additional up to $19,000 extra, according to data from LendingTree.
Here’s a breakdown of four things that affect your score, and ways you can improve that number.
1. Prompt payment
The best way to get your credit score over 800 is to pay your bills on time every month, even if you are making the minimum payment due. According to LendingTree’s analysis of 100,000 credit reports, 100% of borrowers with a score of 800 or better paid their bills on time, every time.
Fast payments are the single most important factor, accounting for 35% of the score.
To get there, set up autopay or reminders so you’re not late, Schulz advises.
2. Amount of debt
From mortgages to car payments, having a good credit score doesn’t mean you’re debt-free but it’s a proven track record of handling a mixed bag of bad credit. payment. In fact, consumers with the highest credit scores owe an average of $150,270, including mortgages, LendingTree found.
The amount of credit and loans you are using compared to your total credit limit, also known as your utilization ratio, is the second most important factor is a high score – about 30%.
As a general rule, it is important to continuous debt around less than 30% of available debt it limits the effect that can be obtained by high balances. However, the average utilization rate for those with scores of 800 or higher is only 6.1%, according to LendingTree.
“While the best way to improve is to reduce your debt, you can also change the other side of the equation, by applying for a debt limit,” said Schulz.
A long credit history also helps boost your score because it gives lenders a better view of your credit history when it comes to repayment.
The length of your history is the third most important factor in a score, accounting for 15%.
Keeping information open and positive as well as limiting new credit card inquiries will work in your favor. “Lenders want to know you’ve been responsible for a long time,” Schulz said. “I always compare it to a kid who borrows the car keys.”
4. Types of banking and credit operations
Having a diverse mix of stories but also limiting the number of new stories you open will help improve your score, since around 10 % of your total.
“Your credit mix should include more than just multiple credit cards,” says Schulz. “The ideal mix of debt is a mix of payday loans, such as car loans, student loans and mortgages, along with recurring debt, such as bank credit cards.”
“However, it is very important to know that you should not take out a new loan to help your debt mix,” he added. “Debt is a very serious matter and must be taken when necessary.”