A high credit score opens up more opportunities. It’s one of the numbers lenders look at before letting you borrow money. A 750 credit score is an excellent score that can save you a lot of money. According to FICO, 46% of Americans have a credit score of 750 or higher. Joining this group has many perks, and the steps we cover will help raise your score to 750 and beyond.
What Does It Mean to Have a 750 Credit Score?
Consumers with a credit history get a credit score between 300-850. Higher credit scores, such as a 750, are more favorable for borrowers and lenders. These scores reflect a consumer’s ability to manage debt and pay bills on time, two things a lender likes to see in applicants. Higher credit scores make finances easier to manage due to lower costs and more choices. High credit scores reward you for good money habits and effective debt management.
Why Having Good Credit Is Important
You can’t go from bad credit to good credit overnight. It’s a long-term process that many consumers work on because of the benefits. Building your credit score can significantly improve your life and finances. A high credit score lets you capitalize on the following perks.
Cheaper to Borrow Money
Many consumers borrow money to buy cars, homes, and other expensive items. Lenders can supply the necessary capital, but you will have to pay interest. You will have to include those monthly payments in your budget, and they can be a bit higher or lower depending on your score. Lenders review many factors, including your credit score, when deciding your interest rate. Since credit scores give lenders a snapshot of how effectively you manage your money, financial institutions focus on this number.
Borrowers with higher credit scores can secure lower interest rates on their loans. Lenders see these consumers as low-risk and stable income sources. Lenders don’t want to worry about defaults. They will set higher interest rates for consumers with low credit to mitigate this risk.
Reducing your mortgage interest rate by 1% can save you hundreds of dollars per month, depending on the loan’s principal. For example, assume you find a home worth $500,000 in your area and opt for a 30-year mortgage. If you secure a 6% interest rate from your mortgage lender, you end up with a $2,998 monthly mortgage payment. This figure excludes loan fees and taxes. However, if you get the same home with a 7% interest rate because of a lower credit score, you will have to contend with a $3,327 monthly mortgage payment. That’s an extra $329 per month if you end up with the 7% interest rate.
As mortgage rates rise and homes become more expensive, consumers need more ways to save money. Excellent credit will help with your mortgage and any other loan.
Easier to Qualify for Loans
Most lenders have minimum credit score requirements that serve as benchmarks. To qualify for a loan, you’ll need a credit score within the lender’s guidelines. Some lenders have more challenging requirements than others, but a 750 credit score will help you secure most loans, including home and auto loans. Having a FICO score just short of the requirement can make it challenging to get a loan. You may have to make a larger down payment or demonstrate an attractive debt-to-income ratio. Having a credit score close to the minimum can require near perfection in other areas, depending on the lender and the financial product.
Better Rates and Terms
Lenders set higher interest rates for low-credit borrowers. Consumers with poor credit often can’t get financing from traditional institutions. These people often turn to payday and car title loans that don’t have credit score requirements. Unfortunately, these predatory loans have some of the highest interest rates in the industry. A high credit score helps you escape those scenarios. In addition, you’ll get more attractive rates and terms since lenders view you as a financially responsible individual.
Higher Credit Limits
Consumers with good credit can get higher credit limits. Of course, not every consumer hits their credit limit, but it’s an extra safety net in case you have an emergency expense. A higher credit limit also improves your credit utilization ratio, a metric that makes up 30% of your credit score.
Avoid Security Deposits
A higher credit score doesn’t only help home buyers. Renters with good credit have a better chance of getting approved for a unit. Landlords may also make security deposits optional if you have a good enough credit score. Security deposits are upfront rent payments tenants make to demonstrate their commitment to living in the property and keeping up with payments.
The landlord may ask for several months of rent payments as a security deposit. The security deposit covers the first few months of rent, but not everyone has enough funds to make this deposit. A high credit score helps you avoid this expense. Also, getting out of this financial obligation makes it easier to cover other expenses. However, even if you have enough money for a security deposit, it’s nice to know that you don’t have to put down that much capital right away. The choice is yours.
Access to the Best Perks and Rewards
A 750 credit score provides various incentives. You can get more attractive credit cards that offer points and rewards for your purchases. Some issuers provide lower rates for cardholders with good credit. This dynamic can help more consumers keep their credit card balances low and repay interest quicker. You’ll also get better rates for your car insurance and utility bills. Raising your credit score lowers many of your expenses, helping you keep more of the money you earn.
Steps on How to Achieve a 750 Credit Score
A 750 credit score reduces your expenses and helps you access more capital. Many borrowers want to qualify for home and auto loans, and a 750 credit score makes the process easier. Following these steps can help you improve your credit score and surpass the 750 milestones.
1. Make Sure to Pay Your Bills on Time
Paying bills on time strengthens your credit score and can protect you from financial hardships. Payment history makes up 35% of your credit score and is more important than any other category. Creditors report your payments to the major credit bureaus. While good payment history will improve your credit score, creditors also report your late payments. Those payments demonstrate that a consumer fell behind on financial obligations, something that lenders do not want to see. Credit bureaus will reduce your score for every late payment, and if they add up, it can get bad for your score.
Scheduling days to pay your bills or setting up an automatic payment plan can help you pay on time. It is also a good idea to live below your means to encounter this problem less often. It may also be worth picking up a short-term side hustle to address a high credit card debt and any bills that are challenging.
2. Pay Off Your Debts
Falling behind on payments lowers your credit score, and interest will accumulate over time. It’s best to address any lingering debt now before it snowballs and becomes a bigger problem later. This can become especially problematic if a future event hinders your ability to make monthly payments and stay on top of your bills. Paying off debt will put you at financial ease, and it also improves your credit score. That’s because paying off debt lowers your credit utilization ratio.
Your credit utilization measures how much money you have borrowed against the limit. A utilization ratio below 30% will improve your credit score, but it is ideal for getting this number below 10%. That means if you have a $1,000 credit limit, you shouldn’t have more than $100 on your credit card’s balance to receive the maximum credit score growth.
3. Keep Your Credit Utilization Low
Your credit utilization ratio makes up 30% of your credit score. It’s the second-largest category behind payment history. You can lower your credit utilization ratio by getting a higher credit limit or paying off your debts. Asking for a higher credit limit will trigger a hard inquiry and hurt your credit score in the short term. But it can be worth it in the long term if you frequently keep a credit card balance. Asking for a higher credit limit doesn’t make as much sense if you repay your balance at the end of each month.
4. Avoid Hard Inquiries
Each time you apply for new credit or a loan, the lender will conduct a hard inquiry on your credit report. A hard inquiry won’t devastate your credit score. You will only lose a few points that you can quickly recover from. However, hard inquiries can add up if you apply for too many credit cards and financing. They can affect your loan approval if your credit score is near the minimum. You should only apply for a loan or line of credit when you need it, and be wary about submitting any applications if you have a mortgage or auto loan application coming up.
5. Become an Authorized User
Authorized users can piggyback on someone else’s credit history. An authorized user benefits when the primary account holder pays their debt on time. It doesn’t cost anything for a friend or family member to add you as an authorized user. While being an authorized user on someone else’s credit card can automatically improve your score, it can have consequences. Any negative marks on the primary account holder’s credit also appear in your credit report. Some people get hurt by becoming authorized users because the primary cardholder doesn’t have their finances in order. That’s why you should only become an authorized user for someone who pays their debt on time.
6. Get A Credit Builder Account
Consumers raise their credit scores to get loans, and by obtaining a loan, you can demonstrate a strong payment history. Each monthly loan payment tells creditors that you can keep up with your bills. While this sounds good, the problem resides in getting your first loan. Not every consumer has a high enough credit score to get a conventional loan. That’s where credit builder loans come into play.
A Credit Builder Account is the bridge from your current credit score to a loan. You make a security deposit for the loan and then make small monthly payments. Most of these loans have small balances between $500 to $1,000, with payment plans spread over 6-24 months. This arrangement makes the monthly payments reasonable, and the lender will report your payments to the major credit bureaus. A credit builder loan isn’t the best choice for someone who already has a good credit score. However, this financial product can take a bad score and make it a good one.
7. Apply for Credit Monitoring
Tracking your progress can lead to significant improvements. Credit monitoring lets you check your score and notify you about any credit report changes. In addition, credit monitoring can reveal insights about your credit and help you detect fraudulent activities.
8. Dispute Any Credit Reporting Errors
The credit bureaus aren’t perfect, and some errors may appear in your report. You should occasionally review your report and dispute any mistakes. Credit bureaus will take these errors off your record. You can gain a few points by disputing items that don’t belong on your report or get reported inaccurately.
9. Manage Your Finances Well
Maintaining a close watch on your spending and savings habits can enhance your credit score. A well-managed spending plan, timely bill payments, and early income can prevent late payments that adversely impact credit scores.
Mobile banking apps, such as Current, allow users to monitor their expenses through a dashboard or mobile app. Additionally, they offer high-yield savings accounts to enhance savings and a direct deposit feature for receiving payments up to 2 days in advance compared to traditional banks.
To improve your money management, you can visit Current’s website to review the additional features of their app or to open an account with them.