How To Get A 700 Credit Score – And What That Can Do For You
Andrew Dehan8-Minute Read
October 08, 2022
A 2021 report from Experian® found that the average credit score among Americans is over 700. This number indicates that people are getting better at managing their bills and credit. Having a credit score at or above 700 can open up a lot of financial opportunities if you’re looking to borrow loans or save money on interest, so what’s the secret to getting and maintaining this number?
Let’s break down how to get a 700 credit score, how this score can help you and the factors that go into determining your score.
What Is A 700 Credit Score?
If you’re just getting started or have less-than-ideal credit, you may wonder:
- What does having good credit mean?
- How can I improve my credit score?
- What does having good credit get me?
- How do I get a 700 (or above) credit score?
The term “credit score” is often used interchangeably with the term “FICO® Score.” There are different types of credit scores out there, but a credit and FICO® Score are essentially both a method that lenders use to assess the creditworthiness of borrowers.
Is 700 A Good Credit Score?
A 700 credit score is considered a good score. Credit scores typically fall in a range of 300 to 850, with 300 being the lowest and 850 being a perfect score. On this spectrum, a 700 credit score is on the higher end and means the potential borrower has good credit and is considered to be very creditworthy.
Consumers want a good credit score because good credit usually means you get the best interest rates. While interest rates are specific to each lender, every lender offers the most advantageous interest rates to those with better credit. To a lender, a borrower with a higher credit score is lower risk and thus more likely to repay their debts.
What Goes Into Determining A Credit Score?
Before we delve into how to get above a 700 credit score, you should first understand the factors that make up your score. Your credit score is determined by the “big three” credit bureaus: Experian®, TransUnion® and Equifax™. The building blocks of any credit score (whether a FICO® or something else) are pretty much the same.
For the most part, here’s what goes into your total personal credit rating:
Payment History (35%)
The largest portion of a credit score is payment history – how often you make on-time payments toward your current debts. Lenders want to know if you have a habit of making loan and credit card payments on time.
Credit Utilization (30%)
Credit utilization is how much of your available credit you’re using at any given time.
For example, if you have $20,000 in credit between your credit cards and are using $15,000 of your credit limit, this is a credit utilization of 75%.
The general financial best practice is to keep your credit utilization at 30% or below, but recent reports from CNBC recommend keeping utilization at 10% or below for an excellent credit score (750 and above).
Lenders look at credit utilization to determine if you have a healthy relationship with credit – that is, whether you carry balances each month or you’re paying your obligations back in full.
Length Of Credit History (15%)
The longer you’ve been using credit (and keeping lines of credit open), the higher your credit score will be. A long credit history shows lenders you’re not new to borrowing and have a history of repaying what you owe.
Credit Mix (10%)
There are different types of credit: revolving debt (like credit cards and lines of credit) and installment loans (like auto loans, student loans and mortgages). Lenders want to see a mix of credit because it indicates you have experience with different types of credit and can handle each responsibly.
New Credit (10%)
Anytime you apply for a type of credit, it triggers an inquiry on your credit report. Soft inquiries won’t affect your credit score, but a hard inquiry will. Lenders like to see only a handful of inquiries at a time because lots of inquiries in a set period could indicate financial trouble.
How To Get Your Credit Score To 700
You can hit a 700 in a variety of ways, but if your credit score is low and you want to get a 700 score, you’ll have to work at improving your credit.
Take the following steps to aim for a credit score at or above 700.
- Keep your credit utilization low. Since credit utilization makes up the second-largest percentage of your score, the less debt used out of the total amount available to you, the higher your credit score will be.
- Limit new credit applications. Opening a new credit account frequently will lower the age of your credit history, which will hurt your credit score.
- Keep a versatile credit mix. Having a nice mix of revolving and installment debt will show you’re capable of managing multiple types of credit accounts.
- Keep old credit cards open. Credit bureaus want to see a long credit history of managing debt, particularly with low balances, so closing old accounts can hurt your score.
As important as these items are, it’s more important to pay off debt and pay on time than to worry about your credit mix and opening new lines of credit, but it all counts.
How Long Does It Take To Get A 700 Credit Score?
The good news is that you can always work to make your credit score higher. The bad news is that sometimes it takes time. For example, if you have more than three hard inquiries, you may want to wait before applying for new credit. This will limit new inquiries on your credit report, or you can wait potentially up to 24 months for an existing inquiry to “roll off.”
To see faster score improvements, you can pay down balances to lower debt-to-income (DTI) and credit utilization ratios. This will likely yield an improvement within just a few months.
Use Our Debt-To-Income Calculator To Find Your DTI
What Can You Get With A Credit Score Of 700?
In a broader economic sense, having a good credit score means you won’t be turned down for important milestones like getting a mortgage or a job, or when a landlord checks your credit in order to assess whether they should rent an apartment to you.
A 700 score also offers the following benefits:
An excellent credit opens up various financing options, such as home and auto loans as well as a personal loan if you want to make a large purchase or consolidate debt.
It’s also important to maintain healthy credit since most mortgages have minimum credit score requirements. Consider:
- A conventional loan typically requires a credit score of at least 620.
- An FHA loan requires a minimum credit score of 580.
- A VA loan has no minimum credit score, but lenders do. (Rocket Mortgage® has a minimum credit requirement of 580.)
- A USDA loan requires a minimum credit score of 640.
With a 700 credit score, a borrower would likely have access to any mortgage option they wanted among those listed above.
A good credit score can also save you thousands of dollars over your lifetime. Let’s use buying a home as an example. Interest rates are set by the Federal Reserve and dictate the price at which banks can borrow money from the government.
The banks then turn around and set the “price” of how much it costs for consumers to borrow money.
- For someone who has a “fair” credit score of 650, a $200,000 mortgage at 68% will cost $264,075 in interest alone over 30 years.
- At today’s rates, someone with a 700 credit score may pay 86% interest on a $200,000 mortgage and pay just $225,585 over the life of the loan. This means even a 50-point difference in credit score will save someone over $38,000 over 30 years.
- This equals a savings of over $1,000 each year, just for having a higher credit score.
*Rates accurate as of September 15th, 2022.
More Buying Power
Did you know that having good credit and a lower interest rate can increase buying power on a big-ticket item such as a mortgage?
A higher credit score means you’ll get a lower interest rate, which means you can get more house (or car, or whatever you desire) for your hard-earned money.
Let’s use mortgages again as our example since interest rates on a home mortgage affect the monthly payment. Recent data finds that with each .0125% change in interest rates, your home-buying power can increase or decrease.
For example, let’s say you only have $1,500 each month to spend on a housing payment. With a $5,000 down payment and 6.25% interest rate, you could afford around $250,000 worth of house in your area.
By shaving off one percentage point, a home buyer with $5,000 down and a 5.25% interest rate could buy a home closer to $280,000 and still keep their monthly payment at $1,500.
Now imagine the savings and increased buying power across everything a consumer finances in their lifetime: private student loans, personal loans, auto loans and more. When put in this context, a 700 credit score gets you a lot.
Can You Borrow More With A 700 Credit Score?
An improved credit score doesn’t increase the loan amount you can borrow, since you will only be allowed to borrow up to a certain amount of your income.
The biggest indicators of how much a consumer is allowed to borrow are DTI and the amount of the down payment. The larger your down payment, the more you’ll be able to borrow. Additionally, the lower your debt-to-income or housing-payment-to-income ratio, the more you’ll be able to borrow.
A 700 credit score does dictate how much you’ll pay for debt, which means you’ll pay less for what you do choose to borrow over time, which can account for thousands of dollars in savings over a lifetime.
How Many People Have A 700 Credit Score?
Credit scores fall into ranges, which are what lenders use to determine the interest rate to offer you on items such as mortgages and personal loans.
- Exceptional: 800+
- Very Good: 740 – 799
- Good: 670 – 739
- Fair: 580 – 669
- Poor: 579 And Below
The average credit score in America is 714, according to Experian. The same study found that 71% of Americans have “good” credit and the average age to reach a 700 score is 41 – 56.
While this data may seem to indicate it takes a consumer until mid-life to achieve “good credit” status, the average millennial has a credit score of 686, meaning they aren’t far off from a 700 credit score and they can easily achieve a 700 with a few good credit moves.
Most research finds that those with a 760 score and above receive the best rates, so the interest rate savings above a 760 are minimal. For those getting started or those with low or thin credit profiles, 700 is the best major credit score milestone to strive for, but it still leaves room for more improvement in the future.
Since time is often required for factors of a credit score (length of credit history, history of on-time payments, waiting for inquiries to roll off the report, etc.), 700 is a great starting point and often the gateway to an even higher credit score down the road if you’re willing to be patient.
While waiting for your score to improve, a baseline 700 score will ensure access to more types of credit and lower rates than a credit score in the 600 to 699 range.
A credit score of 700 or above can open a lot of financial doors for you and make you extremely creditworthy in the eyes of lenders. This credit score number can qualify you for lower interest rates and a number of home loan options, so getting and maintaining a 700 score can pay off in numerous ways. Understanding how your score is determined will make it easier for you to maintain a good or excellent score.
Want to see what personal loan rates your credit score can get you? Get prequalified today with Rocket Loans℠.
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