We’ve all been there before. Just when you are least expecting it, your car breaks down or an unexpected medical emergency occurs. It is important to make sure that you have a good credit score so that you can get a personal loan or auto loan to cover those surprise costs.
Your credit score is a three digit number that decides your risk factor to most lenders. It helps them decide where or not to loan you money for a mortgage, car loan, personal loans, revolving credit, or a college loan. Credit scores are made up of your open accounts, credit history, repayment history and the level of debt that you are in currently. Your credit scores will also be what affects interest rates on your loan.
Managing credit scores is an important part of your life and O’Bryan Law Offices can help you with not only achieving a perfect score but also maintaining it as well. It’s helpful to know that credit scores are based on credit report information. Scores are calculated by companies that specialize in credit scoring. They use things such as the FICO credit scoring system. Our Kentucky bankruptcy lawyers are here to help you understand good credit habits so that you can get out of debt and obtain a better financial future.
What Does Having an 800 Credit Score Mean?
An 800 to 850 FICO score is considered to be an exceptional credit score. An 800 credit score is a near perfect credit and shows lenders you are a trustworthy borrower. You may qualify for better mortgage and auto loan interest rates with a high credit score. When you have an 800 credit score, you have accomplished everything you need to do to show that you are a credit worthy consumer. Banks and credit card issuers will be eager to loan you money with low interest rates.
If you have an 800 FICO score, you have a great history with lenders. This means you have not missed payments or have anything that is concerning on your credit report. You will be able to apply for and receive a new credit card with ease.
Benefits of Achieving an Exceptional Credit Score
When you have an excellent credit score, you can receive many advantages and perks. One of the biggest rewards is lower interest rates. This will save you money and allow you to pay off the monthly bills much easier. Another benefit of great credit scores is higher lines of credit. When a lender is confident in your ability to repay the loan they will be more open to loaning you more money.
Credit scores also play a part in your everyday life with car insurance rates. The CFPB will tell you that insurance companies can approve or deny your application if they deem you too risky to insure. They can use your credit history to decide on your premiums. Car insurance companies can also decide whether to renew your policy or not if you have a poor credit score.
Home insurance can also be changed based on your credit score. That’s because insurance companies may want to know that they can trust you to make your payments. They will look at your credit history in the same way that other lenders do.That may include your history of on-time bill payments and your total debt. If you have a poor credit history you may pay more in premiums.
Other needs like cell phones and utilities can be hindered by a low credit score. These companies may require you to pay a security deposit if your credit score does not meet a certain number. Your housing is also a big part of your credit score as well. Receiving a good interest rate on your mortgage will determine if you can afford your dream home. It may also affect a rental company’s decision on whether you can rent their home.
Did you know that employers also check credit scores? Companies will check a potential employee’s credit to ensure that the person is reliable. A bank may not hire you if you do not have a good credit report. This does not mean you need a perfect credit score to get a job but having a good credit score and credit reports can go a long way with your potential employer.
Building Credit Scores: How to Get an 800 Credit Score
Building your credit score should begin when you are a young adult. There are many ways to build your credit and we will address a few points below.
Some people will choose to build their credit score with a credit card. Credit card companies report to the credit bureaus monthly. Secured credit cards are a great way for people who are just starting their credit journey. A secured credit card requires a savings collateral or a deposit.
Credit cards can help you on your way to exceptional credit scores but there are also ways to build your credit score without a card. If you are renting an apartment or home you can check with your landlord to see if they report your payments. Utility and phone bills are another way to boost your credit score.
Some banks offer a credit building loan. This loan would be for a small sum and would be paid off within 6 months to two years. Your payments will be reported to credit bureaus. If you pay on time, you can see an increase in your credit score after time. You also can access the amount that you borrowed too.
Car loans and personal loans are very common among younger adults who are starting out on their credit journey. Making your car loan and personal loan payment on time will add to your credit score and show that you are a responsible borrower.
Pay Your Bills on Time
Payment history is important because it makes up for 35% of your FICO credit score. This makes it crucial to not have a single missed payment. If your bills are past due by 30 days, your creditors can report it to the credit bureaus.
Once your credit reports list a late payment, it can cause serious damage to your credit score. Many people will choose the autopay option to prevent a late payment history. Lenders consider your entire credit history and if you have issues they can consider those as red flags. Having an account referred to a collection agency is also a red flag.
While a few negative spots on your credit report may not stop lenders from giving you money, you are likely to get approved for a smaller amount of money than you might have if you had an 800 credit score. You will also have a high interest rate when you have a lower credit score.
Keep Credit Card Balances Low
Eighty three percent of Americans carry around at least one credit card today. There were 1.1 billion credit cards in the U.S. in 2022. Credit card debt makes up $925 billion in US debt.
Credit card balances are an important part of your credit score. Paying off your credit card each month looks great on your credit report and also saves you money in interest. There are many different credit card companies and you will need to research the best for you. High credit scores will ensure that you will get a lower interest rate. Cards can come with an annual fee or other fees as well, so research is vital.
There are card companies that will work with individuals with a poor credit score. This may mean that you will not have higher credit limits and will pay higher interest rates. For people with poor credit scores though this can be a choice that they use to build credit. Go for a low credit limit and do not charge much to the card. If you pay it off each month, it can put you on your way to an 800 credit score.
Credit scoring models closely monitor credit card activity when calculating your credit score. Because you have more control over how you manage credit cards than with other types of credit, how you handle your active accounts helps credit bureaus measure what level of risk you pose to lenders.
You should strive to keep your credit utilization ratio as low as you can. That sounds like a confusing word but credit utilization ratio means the money you owe on your credit cards compared to the total limit of your line of credit.
Credit reporting agencies watch your credit utilization ratio, as it can show how well you control your finances. A low ratio shows that your balance is stable and manageable, while a high ratio shows that you may be struggling to pay your debts.
Be Mindful of Your Credit History
15% of your FICO score is the length of your history of credit. If you have negative, minimal or no credit history it can prevent you from getting new credit accounts. Having a long history of good credit accounts and on time payments is good for your credit rating. The number of times you use your credit cards also attributes to how lenders view your credit history. A longer credit history that is positive and with no outstanding balances will show favorable terms to lenders who prefer an 800 credit score.
Improve Your Credit Mix
To achieve a credit score of 800 or more you will need to have installment credit. Installment credit is a fixed amount of money that you borrowed. Examples can include mortgage loans, a car loan or personal loans. Making the payments on time for these loans will help you with your credit score.
Paying your bills on time is an important part of your credit mix. If you can achieve revolving and installment credit it will help you have a credit mix that is favorable to lenders. This shows you can handle multiple types of loans, and in turn boosts your credit. Your credit mix accounts for 10% on your FICO credit score.
Review Your Credit Report
It is very important to check your credit history and score regularly. This can give you a better understanding of your current credit situation, as well as how you look to lenders. Regularly checking your credit reports also shows that you care about your credit. Checking your credit reports for inaccurate or incomplete information can also help you avoid score drops from these mistakes.
Credit reports are not always accurate. Errors on your credit reports can drop your credit scores and decrease your ability to get a loan. Reviewing your reports regularly can help you monitor for things like identity theft and fraud, as well. With the Fair Credit Reporting Act, you can receive a free credit report every year from the three major consumer credit bureaus.
Call Our Kentucky Bankruptcy Lawyers for Credit Help
You can generally expect your credit score to update at least once a month, but it can be more frequent if you have multiple financial products. Many people have questions like “Should I pay off my debt faster or pay it each month to build my credit?” or “How can I fix my credit score after experiencing identity theft?” These questions can be answered by our experienced staff at O’Bryan Law Offices. We have aided many clients in overcoming bankruptcy and working to build their credit score. Let us help you achieve credit reports that you are proud of and that benefit your everyday life! Call us today at 502-400-4020 for a free consultation!