Q: I recently checked my three credit scores and their average was 700 (702 to be exact). Is 700 still a good credit score or not?
A: As with many things that are bantered about online, there continues to be quite a bit of speculation and downright misinformation about credit scores in general and especially scores in the particular range. It certainly could be considered within the “good” score range, rest assured. Back in the golden days – before the once in a lifetime financial crash, a 700 may have been enough to get you approved for almost every credit card. However, in the years following that financial calamity banks tightened their underwriting belts considerable after millions of people kind of forgot to pay the credit card bills, resulting in huge losses and write downs. Not to shed a tear for the credit card industry, though. They’ve been making record profits for the past several years and delinquencies are at historic lows. As with the rest of the financial industry, the card issuers didn’t have any permanent scars from that whole debacle. You and me, that’s probably another story.
So while your credit score may have been considered good in the past, nowadays you may need the equivalent of 750 or higher to be considered to have “excellent” credit. However, a 700 credit score will still get you in the door with most issuers. You just might not get their lowest APRs, most generous credit lines or best rewards right off the bat.
But is 700 good compared to the average score? Yes. There have been reports in the news that cite the average credit score in the country as being around 670. But a 700 may be considered below-average in some parts of the country. For example, residents in many areas of the Midwest are known to have above-average scores when compared to the rest of the country. Not only are they said to be nicer than most folks, they have squeaky clean credit to boot. You also have to remember that “averages” can get skewed based on people with extremes at either end of the spectrum.
Not all credit scores of 700 mean the same thing, however. When people say “credit score” they are typically referring to a FICO score, which is by far the most widely used scoring system in America. It was developed by Fair Isaac Corporation in 1956, but has evolved over the years. It’s exact formula is a proprietary secret. The FICO score range runs from 300 to 850.
FICO essentially has had a monopoly on the industry, so back in 2006 the three major credit bureaus (Experian, TransUnion, and Equifax) came out with VantageScore to compete. It used to run on a 501-to-990 scale, but switched to a 300-to-850 score in 2013 to more closely mirror FICO. So far is has yet to gain much traction in the industry. But is 700 good on the VantageScore scale? Nope! It’s only a “D” (they give letter grades for different ranges).
What can you do to improve your score?
Well we could write a whole textbook on the subject, but here are three easy tips to follow…
- Manage all credit responsibly – Much of this is common sense… always pay your bills on time and of course never let any debt go to collections. This is probably the most important thing to do – as payment history accounts for 35 percent of your credit score. Some people think that in order to get a good credit score, you need to carry balances on your cards… that is absolutely untrue! What is reported to the credit bureaus is the amount on your monthly statements (the amount due, before you pay it). So even if you pay in full all the time, that spending will still be showing up on your credit reports.
- Have and use multiple lines of credit – If you seldom use credit cards and loans, your credit score isn’t going to be that good. Your credit score takes into account the types of accounts you have, how long you’ve had them, and your payment histories on them. It’s good to have an eclectic mix of different types of credit… installment loans (car loans, mortgage loans, student loans) and revolving lines of credit (credit cards).
- Keep your credit card balances low – A small component is based on what percentage of credit you use on your revolving credit accounts (credit cards). No one knows the magic number for sure since the FICO formula is secret, but the consensus among most personal finance experts is you should never use more than 30% of your credit limit on any credit card at any time.
Which cards to consider with a 700 FICO score
If you have a 700 credit score, you’re not necessarily shut out of earning rewards. This card, for example, markets itself to people with average to good credit:
Once you’ve done some work on your score, you can start adding cards for excellent credit to your portfolio, like this one.
How one of our members got his FICO score into the mid-700’s by age 21
He never had loans of any kind, but was still able to work his way up to a FICO score in the 700’s (761 to be exact) by his 21st birthday.
How did he do that? It was simple…simply utilizing a number of credit cards, all without balances either. Instead he just kept them active by rotating which cards used every few months. For example, he might use 2 cards one quarter, 2 different cards next quarter, and so on.
By having around seven active credit card accounts, his credit score increased rapidly. Do you have enough cards yourself? There is a common misconception that having more than a few credit cards will kill your credit score. This simply isn’t true. There are many of our forum members that have more than will fit in their wallets and can boast about very high credit scores too — it’s all in how you manage them.
Updated January 13, 2016