Credit scores are usually placed into categories. A credit score can fall into a range from bad all the way to excellent. Unfortunately it is not as easy as saying that a 700 credit score is good or a 700 hundred credit score is bad. The truth is that it is neither here nor there when it stands on its own. When a lender or creditor is pulling a person’s credit to determine if they are worthy of lending money to they will usually pull a number from 3 different credit reporting companies. Lenders then look at these 3 scores and take an average (or even the middle of the three numbers) and make their decision on if they will loan the person the money at all, and if so, how much the interest rate will be on the loan. With this process in mind, imagine a person goes to an auto dealership for a loan on a new car. The financer at the dealership will pull numbers from three different credit reporting companies. If the first 2 are in the 600’s and the third is a 700, they will take the middle or average which would mean that individual will get rates or a loan (if approved) for someone with a credit score in the upper 600 hundred range. Another individual may walk into the same dealership and have 3 numbers pulled for their credit rating with the bottom one being a 700 and the top being closer to 750. The lender will again take the middle number which would be between 700 and 750. The lender will then approve or decline the loan based on this average. So you can see how person A would think that a credit score of 700 was great, and be hoping that the lender sees that and acts accordingly. While person B may be very frustrated by the 700 that appeared in the range of scores, which brought down the credit average. This is why it can be difficult to say with conviction that a 700 is a good score or bad score.
As a result of the 3 number pull, credit scores have begun to be referred to their quality in ranges. Rather than saying one specific number is good or bad, creditors and lenders look at the range to determine what is good or bad. Here are the ranges that most lenders use to determine score value:
Credit Score Range Chart:
|800 – 850||Incredibly Good|
|750 – 799||Excellent|
|700 – 749||Really Good|
|650 – 699||Good/Average|
|600 – 649||Fair|
|550 – 599||Poor|
|500 – 549||Very Poor|
|300 – 499||Exceedingly Poor|
Is a 700 credit score good?
As you can see from the credit score range chart, FICO views a 700 as right between good/average credit and actually good credit. So technically a 700 would be a good score. Remember though, that one score of 700 does not automatically mean you have good credit. Person A in the story above has more average credit based on the 3 numbers, while person B has good credit. The issue however, is that everyone is always hoping to have better credit. So even though person B has good credit even with their low score being 700, they also had a score of 750, which made them hope that they could fall into the excellent credit category and get excellent interest rates. This is why it is important not to compare to others (especially not the national average). In comparison to person A, person B should be happy, but if person B doesn’t settle for the good range (simply because it’s better than most people) then person B can work on raising their credit score averages to an even higher level.
How to get a 700 credit score & keep it
So that brings on another good question: how does a person get their credit score to the 700 hundred level or higher? Free credit score.com has a great chart illustrating very simply what contributes to a person having good or bad credit:
As you can see from the chart, there are factors that contribute (either positive or negative) to a person’s credit score ratings. A person who always pays bills on time, keeps low balances on their credit card and has a history of doing so (meaning there accounts have been handled in this way over a long period of time) most likely has good credit. If they continue in this trend of managing their accounts in order to ALWAYS pay bills on time and keep their credit card balances low then this long-term trend can improve their credit scores over time. They will likely continue in this upward mobility towards the highest levels of the credit score chart.
The contrary is also true. A person who begins to miss payments or even make payment but make them late, will begin to have their credit scores decline (and unfortunately this can happen rather quickly). Just a few late payments can begin to alter a person’s credit score range for the negative. Too many credit requests can also affect a person’s credit negatively. The reason being, that people who are trying to get more credit, more credit cards or loans, are most likely in a bit of a financial pinch. Lenders and creditors see a person trying to get more and more credit in a short amount of time as a red flag that a person is in financial trouble. If a person is in financial trouble and they take out more loans than they can handle then they will begin making late payments or missing payments altogether. Loans may end up going to collections or even being foreclosed. This can be a viscous downward spiral which can leave a person in financial ruin in a short amount of time.
The above chart really shows the items that can help improve credit over time on the top of the chart, while the bottom of the chart shows items that will quickly and drastically make your credit scores go down. If a person can be diligent in implementing the items which can improve credit, and avoid the bottom items at all cost, then a person can begin to improve their credit. Keep in mind that it can take a very long time of being faithful in making payments on time and keeping credit card balances low before you may see any changes in your score. This is primarily because once you are irresponsible with your credit it can take a long time to prove that you can be responsible once again. Lenders need to see a change over a long period of time before trusting a person by lending them more money. This is one of the main reasons why credit scores can go down faster than the speed of lightning, but it takes years of diligent effort to increase credit scores.
My credit score is 700… now what?
Congratulations! Whether you have a 700 as the highest of your 3 number average, or the lowest, you are on your way to having good or even excellent credit! Don’t stop now! A person with a 700 credit score somewhere in their scoring range is at a pivotal point of their financial decisions. This is because with a 700 average a person can most likely get any type of loan they need (based on their employment and income as well). This is both wonderfully exciting, and terrifying at the same time. A person with a 700 score has the opportunity to set themselves up for financial success or financial failure depending on the choices they make. It is important not to use your decent credit score for financing just because you can. It is important not to get sucked into the low financing offers that everybody is advertising these days. It is important not to open a credit card at every store you shop at just because they are offering perks (and besides you have good credit so….). Likely the wisest decision is to only finance the items you need to (perhaps a house for instance, and maybe a car but only one which your current budget can afford the monthly payments with no financial strain or stress). It may be smartest to keep only one or two credit cards, but keep in mind the chart: keep all credit card balances low and always make payments on time.
What can I do with a 700 credit score?
The wonderful thing about having a credit score of 700 is that you can probably do almost anything you need to do (but we probably advise against doing everything you may want to do). Whether 700 is at the high end of your credit range or the low end of your credit range, there are options. Keep in mind that in the 700 hundred range a person will not likely get the best interest rates. Some people choose to wait to buy a home or car until they have improved their scored to ensure better interest rates. So although you may qualify for any type of loan, it may not be the best time to. What you can do with a 700 hundred credit score is try to continue to improve it. As stated above, it may be best to keep just a few credit card with low balances and always make payments on time or early. Continue in this trend, and it is probably best to only use your credit on items that you absolutely must finance. If you can pay cash for a car? All the better. Likely you can’t pay cash for a home, so continuing to build your credit score for when you do purchase a home may be a great financial choice to try to set yourself up for future financial success.