Joining the 800+ Credit Club
Lenders use credit scores to determine a borrower’s ability to repay debts like mortgages and vehicle loans. Credit scores impact lending terms, mortgage rates, and financing eligibility. Typically, scores above 700 are considered good. TransUnion reports only about 20% of Americans have a score above 780 and even fewer rank above 800. How can consumers improve their credit score and reach these elite ranges?
- Planning Ahead – Building credit is an ongoing process and the length of the credit history factors into the score. Credit blemishes take time to repair. Mindful consumers start building credit early.
- Keep Credit Cards Open – It is best practice to leave unused credit cards open, because closing a credit card changes the overall credit limit and the use percentage. Depending on the credit card’s annual fee, it might be worth it to keep the card open.
- Avoid Credit Checks – Credit inquiries known as “hard credit pulls” take points away from the overall credit score. It is best practice to space out big purchases like a new car or a house.
- Limit Credit Usage – The larger the percentage of unused credit the better. Creditors recommend using no more than 30% of available credit each month. Using less than 10% of available credit can gradually boost the credit score.
Paying bills on time, keeping debts low, and following these steps are great strategies for maintaining a good credit score. When shopping for a new home, creditors recommend the homebuyer starts any credit repair six months to one year in advance.