When Is Your Credit Rating “good Enough”?
While a low credit rating definitely affects your ability to qualify for loans at reasonable rates, the upper range of your credit rating doesn’t really matter much. In fact, trying to get your rating outside of a certain range is pretty much a waste of time if you’re trying to get the best interest rates.
Anything above 760 points doesn’t really matter.
It’s easy to get hung up on your credit score, but you only really use it when you apply for a loan, such as when you want to finance a house or a new car. This, of course, does not mean that credit ratings are irrelevant, as a lower interest rate can mean saving thousands of dollars in interest payments alone . But it is important to keep your credit rating in perspective, especially if you already have good credit habits and pay your debts on time.
In fact, a FICO score above 760 doesn’t really matter to lenders, as anything beyond that already qualifies you for the lowest possible rate – what lenders call their “base rate”. As financial expert John Ulzheimer explained to CNBC : “The best published interest rates for auto loans are 720-plus, and for mortgages, 760-plus. So I always tell people to shoot at 760 or better. Thus, they are safe for all types of loans and cards. “
How to raise your account to 760
People with excellent credit scores share the same habits . These include:
- Making consistent payments on time every month , as late payment prevention accounts for 35% of your overall credit score. One late payment can lower your credit score by 100 points for many months .
- Having a good credit balance: Your credit balance determines 10% of your credit rating, so various open credit accounts – credit cards, installment loans, and mortgages – can help improve your rating.
- Using only a portion of your loan each month: Upper-tier borrowers use only 5.7% of available credit . The less you use, the better, as the use of credit accounts for 30% of your credit rating.
- Having very old lines of credit: Your credit history – the length of time that you have open lines of credit – is 15% of your credit rating.
To learn more about how to improve your credit score, read this post on Lifehacker .