If you’re applying for a credit card, a loan, a mortgage or financing, having a good credit score is key. Lenders use credit scores to decide how likely you are to repay your debts on time.
Having a low credit score means you will get unfavorable terms when you do qualify for credit, and in some cases, you may be denied credit altogether.
This post will explain what your credit rating means, and how to get yours back up if it is low.
What Factors Affect My Credit Score?
Your credit rating is affected by your activity on all lines of credit and is impacted by your payment history and your level of debt.
Credit Rating Factors Include:
- Payment History: Late and missed payments on bills and credit accounts negatively impact your score.
- Credit Use Amount: The closer you get to maxing out your credit each month, the lower your score will be.
- Total Debt: Higher debt means a greater risk when issuing further loans and a lower credit rating.
- How Many Credit Accounts You’ve Opened Recently: Opening multiple new credit accounts in a short period adds a temporary negative dip to your rating.
The better you manage your credit, the higher your credit score.
What is the Difference Between a FICO Score and VantageScore?
The two most common rating systems for credit scores are FICO and VantageScore. They both measure your credit but use slightly different factors to determine how high your score will be.
For example, VantageScore more strongly penalizes late mortgage payments than FICO, but FICO treats all late payments the same, even small ones.
Both FICO and VantageScore range from 300 – 850, but have different rules as to what number represents a “Good” credit history.
What is a Good FICO Score?
These are the FICO score ranges and their associated credit ratings:
| Credit Score | Rating |
| 300-579 | Very Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| 800-850 | Exceptional |
What is a Good VantageScore?
These are the VantageScore ranges and their associated credit ratings:
| Credit Score | Rating |
| 300-549 | Very Poor |
| 550-649 | Poor |
| 650-699 | Fair |
| 700-749 | Good |
| 750-850 | Excellent |
How Does My Credit Rating Affect Me?
The higher your credit rating, the better your terms will be when you apply for a loan or line of credit.
Any rating less than “Good” means you will have to pay a larger deposit, have worse interest rates, and in the worst case, be denied credit.
Being “Good” or higher means you will be trusted with better terms on your line of credit, with lower down payments and lower interest.
How Can I Get My Credit Score Up?
There is no quick way to get your credit score up, but by making the right moves you can get your score up to where you want it to be.
Pay Bills / Minimum Payment on Time:
Even if it’s just your minimum payment, ensure you always pay your bills on time. If you’ve had a history of missed and late payments, this is the best thing you can do to boost your credit score.
Don’t Max Out Your Credit Cards:
Frequently maxing out your credit or getting close to maxing out credit, even if you pay it off, still has negative consequences for your score. Raise your credit limit if you are eligible, and shift spending around your cards if necessary.
Don’t Continually Shift Your Debt Around:
It may be tempting to shift your debt onto cards with lower interest rates, but having the same amount of debt in fewer accounts can lower your score.
Need To Make Faster Progress? Hire a Credit Repair Company
For expert advice personalized to you, try working with a credit repair specialist. RepairCreditQuick partners with financial managers who will work with you to manage your debts and boost your credit by disputing negative factors in your credit report.
To get a free consultation on how we can help, contact one of our agents today.