Your credit score reflects your bill payment history, your debt load relative to your income, and your credit history. What are the signs that you have a good credit score? How do you know that your credit score is improving? And what are your options when you want to improve it further?
Your Credit Score Is High
The most obvious sign of a good credit score is the high number on your credit report. The highest possible credit score is 850, though only a handful of people achieve that. A credit score over 700 is considered good. Most credit scores are between 600 and 750.
Your Bills Are Going Down
Your credit score is a reflection of both how well you manage your debt payments and your bill payment history overall. For example, if you miss a car payment or are late with a mortgage payment, this is recorded as a strike against you on your credit report. Your credit card interest rates are likely going to go up. Your insurer could raise your rates, too, because of the greater perceived risk they take with you as a customer. If you’ve had issues like this in the past but get your act together, you may find that your bills start to go down. Your credit card interest rate falls a few points after you’ve paid all your bills on time and in full, so the minimum monthly payment is reduced. Your insurance rate spiked when you were late with the car payment, but after a year or so of good payment history, your new bill maybe a little lower.
Credit Offers Are More Favorable
One way to know that lenders consider you a good credit risk due to your good credit is that their offers have good terms. You see it in credit cards with 10% interest rates instead of 20% interest rates. Or your mortgage offer is 3% to 4%
Deposit? What Deposit?
We’ve said that your credit score is seen as a measure of your ability to manage money and pay your payments. One sign that your credit score is considered good is that the deposits you are asked to put down are decreasing or disappear altogether. For example, good credit risk is asked to pay a one month deposit on an apartment while a bad one may be asked to pay three months upfront. When setting up new utilities, good credit risk is asked for $50 to $200 whereas a bad credit risk is asked for more money upfront to cover the bills if they are late with a payment.
The “Bad Credit? No Problem!” Offers Disappear
If you had bad credit, one way you know that your credit is improving is when you no longer receive offers that cater specifically to those with bad credit. When you receive standard credit card offers or car loan offers from your bank instead of something that says a bankruptcy doesn’t matter, you know your credit score is improving.
How to Improve Your Credit Score
If you have a good credit score, that is a credit to how well you manage your money. However, you should know that it is almost always possible to raise your credit score further. Let’s look at a few ways you could bring the score up higher, potentially saving you money on your debt payments and insurance rates.
Review your credit report. You may find that a duplication of a major debt like a car loan hurts your debt to income ratio, weighing down the credit score. In other cases, identity theft and outright mistakes hurt your credit score, such as when an ex’s failure to pay the car loan in their name is held against you or a thief bought a cell phone in your name but never paid the bill.
Stop shifting debt around. Opening up new credit cards, closing old ones and carrying the same (or greater) debt load hurts your credit score. Tighten your belt, stop spending as much, and start paying down your debt instead. However, you should leave the older lines of credit open so that the long-term accounts boost your credit score. Check out BranchRight.com.
Get a handle on your bills, and pay all payments on time and in full. Any missed payment will end up hurting your credit score, so being late on the phone payment last month and car payment this month both count against you. Worse yet, the damage from any and all such mistakes compound. Only a clean bill payment history to everyone from utilities to creditors will repair the damage.
You are more than your credit score, but it is, unfortunately, what many organizations use to determine the terms on which they’ll do business with you. Track your credit score, and follow our advice to get your credit score up.