Is 700 a Good Credit Score? Find Out What It Means!

Is 700 a Good Credit Score？

Yes, a credit score of 700 is generally considered to be a good credit score. This means you have a history of managing your credit responsibly, and lenders may view you as a lower risk when extending credit or approving loans. Also, there is still room for improvement in a credit score of 700. Moreover, understanding the benefits of a 700 credit score can also help you to get a better financial situation.

What You Can Access with a 700 Credit Score?

Mortgages and Home Loans:

With a 700 credit score, you stand a good chance of qualifying for a mortgage or home loan. Although some lenders may require a higher credit score for the best rates, you should still be able to secure financing with favorable terms.

Auto Loans:

A credit score of 700 can also help you obtain auto loans at competitive interest rates. A 2022 Experian report found that nearly 65 percent of auto financing borrowers have a credit score of 661 or higher. This means that if you have a credit score of 700 points, you can easily get a loan for a car. However, the interest rate may not be the lowest.

It is also worth noting that the interest rates for new and used cars within the same credit score range differ. For new cars with scores between 661 and 780, the average interest rate is 4.03%, compared with 5.53% for used cars.

Credit Cards:

A 700 credit score can open the door to various credit card options. While the most exclusive credit cards may require an excellent credit score, you should still qualify for cards that offer rewards, cash back, or 0% introductory APR offers.

Personal Loans:

With a 700 credit score, you will likely be eligible for personal loans at attractive interest rates. It is enough for you to have a broader range of personal loan options. The rates will be more favorable if you have a higher credit score.

Higher Credit Limits:

A 700 credit score may also result in higher credit limits on your credit cards and other lines of credit. Lenders or credit card issuers usually consider different factors when determining credit limits, including income and credit score. If you have a good credit score, the credit limit will increase, leaving you with more available funds.

Credit Score Ranges and Factors Affecting Your Credit Scores

Understanding the factors that affect your credit scores is essential to managing and maintaining a healthy credit profile.

The General Score Ranges for Lenders

While different credit scoring models may weigh these factors differently, some common elements influence all credit scores. These factors generally fall into five categories:

Payment history: Making payments on time is an important factor in your credit score. Whether you are behind on payments and repayments or have filed for bankruptcy, this can hurt your credit score.

Credit utilization: This refers to the percentage of available credit you're using on your revolving accounts.You can increase your credit score by lowering the utilization of credit.

Length of credit history: The average age of all your credit accounts and the age of your oldest and newest accounts play a role in determining your credit scores.

Types of accounts (credit mix): You can increase your credit score by proper handling of installment accounts, such as auto loans, personal loans, and mortgages, as well as revolving accounts like credit cards.

Recent activity: This includes recent credit inquiries and newly opened accounts. A few inquiries or new accounts in a short period may negatively affect your credit scores.

FICO Credit Score Ranges

Credit scores depend on personal credit reports, and each category in the report has a different impact on the score. Therefore, it is especially important how to quantify each category. In FICO®, the percentage impact of each category is as follows:

Payment history: 35%

Amounts owed: 30%

Length of credit history: 15%

Credit mix: 10%

New credit: 10%

VantageScore Score Ranges

VantageScore sets up its assessment system according to how each factor in a credit report affects a credit score. VantageScore includes the following factors:

Total credit usage, balance, and available credit: Extremely influential

Credit mix and experience: Highly influential

Payment history: Moderately influential

Age of credit history: Less influential

New accounts opened: Less influential

What Information Credit Scores Do Not Consider?

While credit scores consider various factors related to your credit profile, there are certain pieces of information they do not consider. These include

• Your age, race, nationality, or gender
• Marital status
• Source of income and employment status (but some lenders still list these as factors. )
• Where you live
• Any participation in credit counseling
• Certain types of inquiries, such as promotional or account review inquiries
• It's important to note that credit scores focus on your credit behavior and history, not on personal characteristics or demographics.

The Changing Landscape of Credit Scores: 700 No Longer Above Average, Even in the Pandemic

2005: A credit score of 700 was considered above average, as the average score was around 688.

2019-2020: Average credit scores significantly increased by eight points.Due to the COVID-19 pandemic and the economic downturn, consumers and lenders have become more cautious about lending.

Interestingly, credit scores have generally improved during the pandemic, as consumers have continued to manage their credit responsibly. Regardless, it is still too soon to draw any conclusions, as the economic conditions remain crisis-ridden. This scene may change.

During the pandemic, banks tightened their lending standards across credit card, auto, and consumer loans.For example, it used to be possible for you still to get a credit card with a score of 670, but during the pandemic, the minimum credit score requirement for many credit cards has increased from around 670 to 720 or higher. Improvements in health and financial status have mostly brought loan standards back to pre-pandemic levels, but we are unsure if the limit will be raised again.

The potential risks of high inflation, a potential recession, and rising delinquencies among subprime borrowers are causing lenders to become cautious once again.

As a result, we may see the minimum credit score requirements continue to trend upward.

Why Are There Different Credit Scores?

There are different credit scores because multiple credit scoring models and agencies exist to assess creditworthiness. The two most prominent credit scoring models are FICO and VantageScore. Each model evaluates a full range of factors that affect credit, such as payment history, credit usage, length of credit history, account type, and recent activity. Still, all have different criteria for calculating credit scores. As a result, the credit scores for the same individual can vary slightly depending on the model used.

Lenders may also use industry-specific credit scores tailored to specific types of loans or credit products. These scores may have different ranges and criteria, making them more suitable for assessing credit risk within a specific context.

Why Having a Good Credit Score Is Important?

Having a good credit score is crucial for several reasons:

More Chances For Credit Products.

A good credit score increases the likelihood of being approved for loans, credit cards, and other types of credit products.

Lower Interest Rates.

A higher credit score generally results in lower interest rates on loans and credit cards, saving you money over time.

Fewer Difficulties in Renting.

When checking the rental application, some landlords may check your credit score. A good credit score can help you rent an apartment without much hassle.

Favorable Insurance Terms.

Insurance companies may use credit scores to determine insurance premiums. A good credit score can lead to lower premiums.

Better Terms for New Accounts.

Utility providers may check your credit score when setting up new accounts, and a good credit score can result in better payment terms or lower security deposits.

Increasing Employment Opportunities.

Credit scores are a consideration for some positions, such as those involving financial responsibility. A good credit score can increase your chances of getting hired or securing a promotion.

How to Improve Your Credit Scores?

Have Timely Payments.

Timely payments are essential to maintaining a good credit score, as payment history is the most significant factor in most credit scoring models.

Keep credit utilization ratio under 30%

Aim to use no more than 30% of your available credit on revolving accounts, such as credit cards. Lower credit utilization can positively impact your credit score.

Manage All Types of Credit Wisely.

Lenders like a diverse credit portfolio. If you can show that you can manage installment loans (mortgages, auto loans, personal loans) and revolving credit (credit cards) responsibly, it can lead to a higher credit score.

Keep Old Accounts Open.

Keeping older accounts open can positively affect the length of your credit history, another factor in calculating credit scores.

Limit Hard Inquiries.

When you apply for credit, a hard inquiry is recorded on your credit report, which can temporarily lower your credit score. Minimize the number of hard inquiries by only applying for credit when necessary.

Check Your Credit Reports Regularly.

Check your credit reports from all three major credit bureaus (Equifax, Experian, and TransUnion) at least once a year.

Dispute any inaccuracies to maintain accurate information and protect your credit score.

Accumulate Credits Properly.

Don't worry if you haven't used credits yet. You can always build a positive credit history by using a secured credit card, having a credit-builder loan, or becoming an authorized user of another's credit card.

What's the Difference Between a Credit Score and a Credit Report?

A credit score is a numerical representation of your creditworthiness, calculated based on the information in your credit report. As discussed, several credit scoring models like FICO and VantageScore have scores ranging from 300 to 850. Lenders usually use the score to assess the borrower's credit risk.

A credit report is a detailed record of your credit history, including information about your loans, credit accounts, payment history, and public records (such as bankruptcies or tax liens).In addition, it also includes your personal information, such as your name, address, and Social Security number. The three major credit bureaus (Equifax, Experian, and TransUnion) are responsible for producing credit reports. You can request a report from each bureau, but it is only free once a year.

FAQs:

How Does a Late Payment Affect a 700 Credit Score?

While paying a day or two late might result in a late fee or a higher interest rate, it's not necessarily disastrous. However, allowing a bill to go unpaid for 30 days or more can cause a significant drop in your credit score. In the worst-case scenario, your score could drop by a hundred points or more due to a late payment, especially if you have a good score like 700. There are other factors, but it is recommended that you make on-time payments a top priority.

How Much Can Someone With a 700 Credit Score Borrow?

Determining the exact amount you can borrow with a 700 credit score is difficult, as lenders consider multiple factors, including your income, existing debt, and credit history. Your credit score is just one aspect of the lending decision.

Should I Regularly Monitor My Credit Score?

Regularly monitoring your credit score is a good practice to ensure you maintain or improve your credit standing. It can also help you catch potential errors or fraudulent activities on your credit report.

Can I Obtain a Credit Card if I Have a 700 Credit Score?

With a 700 credit score, you will likely qualify for credit cards offering attractive benefits like cashback, travel rewards, or an introductory 0% APR. However, apply for credit cards that offer more exclusive benefits, you need to improve your credit scores as high as possible.

Except for credit scores, credit card issuers consider other factors such as job status or income when making their decision. This means that two individuals with similar credit scores may not necessarily receive the same credit card offers or terms.

If you are denied credit, you can inquire about the reason for the decision, as lenders must provide this information. Comprehending the reasons behind the denial can help you take the necessary steps to enhance your chances of approval in the future.

Additionally, comparing credit card offers designed for individuals with good credit can provide valuable insights into your options.