Any time you apply for a credit card or seek out an auto loan, your credit score is involved. This number doesn't tell lenders everything they need to know about your financial situation, but without a credit score, it would be hard to assess how likely you are to pay back the money.
That's why it's important to know how your credit score measures up and the steps you can take now to boost your numbers — even before you start your next credit application.
Defining a good credit score
650. 725. 800. All of these numbers mean something, but what's a good credit score? There's more than one credit scoring model, but the one most people are familiar with is FICO. The FICO score ranges from 300 to 850, with 300 being the absolute worst score you can have and 800 being the best.
FICO defines a "good" score as any score between 670 and 739. If you have a score of 700, for example, your score would be considered "good."
But is it enough to have a good score these days? That depends. If you want access to credit cards with the lowest interest rates available, great cash back rewards, and low fees, you might want to try to aim higher than just having a good score.
An excellent credit score, for example, is a score of 800 or above. This is a demonstration of some of the best credit use around, and people with an excellent score will get access to the best cards and loan products on the market.
That's why, even if you have a good credit score, it pays to try to raise it.
How can you improve your credit score?
Whether you have a good score or are aiming for one, there are actions you can take now and in the future to boost your numbers. Here are a few things everyone can do to watch that FICO score go up into the good range — or even higher!
1. Pay your bills on time
Raising your score really can be as simple as remembering to pay your bills on time every month and avoiding late fees or penalties. On-time payments are recorded on your credit report and tell lenders that you have a reputation for being prompt and reliable. On the other hand, paying a bill late will show up on your report, could possibly drop your score, and may even cause your current lender to raise your interest rate (making it harder to pay your bill each month). If you do anything in your financial life to keep a healthy credit score, this tip is probably the most important.
2. Apply for credit only when necessary
Consumers today are bombarded with credit card offers, and you may even get asked to sign up for credit when shopping at your favorite store. While credit is useful, you should be careful about when and how you take on new credit. Not only will a credit application result in a temporary dip in credit score from the credit check the lender performs, but it can be tempting to spend on that new line of credit and get further into debt.
3. Keep an eye on credit
Each year, every consumer can get their credit report from the three credit reporting agencies, Experian, Equifax, and TransUnion. You can access them at AnnualCreditReport.com. This won't cost you a dime, and it allows you to review your credit activity and look for errors or even fraud. If you see something you don't recognize, contact the lender and credit reporting agency using their contact form on the site. Fixing errors can be a quick way to boost your score and keep you out of trouble with lenders.
Does checking your credit lower your score? Consumers who look at their annual credit report, check their own scores, or use credit monitoring services will not harm their credit. Credit scores may go down temporarily when a lender pulls what's called a "hard credit check" to see if you qualify for a new line of credit. However, there's no penalty to see your own financial information.
Ready to raise your credit score?
There are no magic answers on the ways to raise your credit score. You'll need to be watchful over your money, disciplined about paying bills on time, and aware of how your credit use affects your score. Getting a good credit score is more about regular, daily habits than a major action you can take, and good credit scores take time to build. If you think you'll need better credit to get a loan or card in the future, start taking steps now to ensure your score meets the requirements.