Your credit score is a snapshot of your debt management skills. Getting your credit score above 800 informs lenders and other groups that you can handle higher loan amounts because you are a lower-risk borrower. A credit score can help you save money, and it has great perks even if you don’t plan on getting a loan. A high credit score will help your finances. This article discusses strategies you can use to build an excellent credit score.
Getting an 800 credit score: what it means
Your credit score is an important number that impacts your financial health. FICO uses a scoring system between 300 and 850, and a higher score provides more advantages. An 800 credit score is excellent and can help you save a lot of money in the long run. Here are some of the perks of getting your credit score to 800 or higher.
Lower interest rates
Each time you borrow money, you owe interest. Lenders review your credit score to determine your interest rate and provide favorable rates to high-credit borrowers. You can qualify for a lower interest rate on a mortgage, auto loan or other financing methods. MyFICO demonstrates how a low-interest rate can make a substantial difference in how much you pay each month. Its Home Purchase Center Calculator provides national averages for mortgage interest rates based on credit scores.
Assume two families purchase separate $500,000 homes. One family has a 620 credit score, while the other family has an 800 credit score. The family with a 620 credit score would have a 7.3% interest rate, while the family with an 800 credit score would only get a 5.7% interest rate. The difference between these two rates is 1.6%, but the family with the lower credit score pays an additional $523/mo for the mortgage. These differences grow as you look at loans with higher principals. A higher credit score can save you $523 per month or more on your mortgage and help with a refinance.
Lenders feel more confident working with high-credit borrowers. You can only get a high credit score by paying your debt and staying on top of your finances. Building credit is a long-term journey, and lenders respect that. They will make it easier for you to get the money you need.
Better approval rates for top credit cards
Many credit card issuers look at your credit score before approving your application. You can get a secured credit card if you have bad credit or no credit history, but you’ll eventually want a credit card with rewards. The best credit cards have lofty credit standards, but with an 800 credit score, you will have a much easier time qualifying for the top credit cards.
Better approval rates for rentals
A high credit score will make life easier even if you don’t have a credit card or borrow money. Landlords look at your credit score and other details to assess your ability to pay rent on time. A higher credit score indicates you can handle your financial obligations and will make you a more attractive candidate.
Negotiate lower interest rates on existing debt
When you buy a house or car, you may not have the best credit score. These purchases help you build payment history, which strengthens your credit score in the future. When you surpass an 800 credit score, you get more negotiating power. You can contact your lenders and ask for lower interest rates on your existing debt. You can get a refinance at an attractive rate or use debt consolidation to capitalize on your higher credit score. Lowering your interest rates on existing debt can save you hundreds of dollars a month. Reducing the rate on your mortgage can single-handedly achieve this goal.
How to get an 800 credit score or higher
An 800 credit score can transform your finances. You can save money with lower interest rates and qualify for more financing and other opportunities. If you’re looking for ways to improve your credit score, start with these strategies.
Pay bills on time
Paying your bills on time is the most reliable way to improve your credit score. Payment history makes up 35% of your score, and those payments impact other vital credit scoring categories. Living below your means will make it easier to pay your bills.
Try to pay off your balance in full
Paying bills on time will lower your balance, but you shouldn’t stop at the minimum payment. Paying off your balance in full will strengthen your credit utilization ratio, a component that makes up 30% of your score. The more of your credit limit you use, the worse it is for your score. You should have a credit utilization ratio below 30% to improve your score, but it’s ideal to keep that ratio below 10%. Mindful spending limits how much debt you will accrue and makes it easier to pay off your balance.
Work toward paying down existing debt
Repaying existing debt will improve your payment history and credit utilization ratio. Because these two credit scoring components influence 65% of your score, you can gain considerable momentum by chipping away at your debt. Reducing debt also lowers your monthly debt payments, which results in a more favorable debt-to-income ratio. While the debt-to-income ratio isn’t important for your credit score, it’s critical for getting loans. Most lenders have debt-to-income requirements for their applicants.
Keep your credit utilization rate low
Credit utilization measures how much money you are borrowing against your credit limit. Borrowers with a $10,000 credit limit and a $4,000 balance have a 40% credit utilization ratio. Getting this number below 30% will improve your credit score, but you’ll see more gains as you chip down this rate. A lower credit utilization ratio also means less debt and minimizes interest accumulation.
Apply for more credit
Lenders look at your credit mix to see whether you can juggle multiple types of debt. Credit mix makes up 10% of your score, and applying for more credit can strengthen this component.
But don’t apply for more credit too often
Applying for more credit will help your credit mix, but doing so too much can actually hurt your score. Most credit applications trigger hard inquiries into your credit history. Each hard inquiry will reduce your credit score by a few points. Applying for a loan or credit card won’t decimate your score, but applying for too many of them can make a notable dent. Don’t apply for credit just for the sake of applying for it.
Review your credit score and reports
Monitoring your credit score provides a glimpse into your current progress and how your actions impact your score. Many banks let customers see their updated credit scores and receive notifications about changes.
You can get a more detailed analysis by requesting a credit report. Consumers can receive a free credit report every year from Experian, Equifax Inc. and TransUnion. Requesting a credit report from one of these credit bureaus every four months will spread your access so you can spot mistakes. Detecting errors and reporting them to a credit bureau can improve your score.
Credit Score Growth Is A Journey
Reaching an 800 credit score will provide numerous opportunities and help you save money. However, you won’t get to an 800 credit score overnight. Staying on top of your debt will help you see incremental growth and get closer to your credit score goal. This score can improve your finances even if you do not plan to get a loan. Credit score growth is a long-term journey that can transform your finances.
What is the highest credit score?
The highest credit score is 850.
How can you increase your credit score fast?
You can increase your credit score quickly by paying down debt. You can also get a credit builder loan if you need to build payment history.
How do you improve your credit score beyond 800?
Getting your credit score past 800 requires paying bills on time, lowering your credit utilization ratio and applying other credit-building strategies over time.