A credit score is an essential aspect of your financial health, influencing the interest rates you receive on loans and credit cards.
A score of 700 is commonly seen as good, but what does it really mean in the broader financial landscape?
In this article, we will break down what a credit score of 700 represents, how it compares to the average American’s credit score, and what it means for securing loans and credit cards.
What is a Credit Score and How is it Calculated?
Your credit score is a three-digit number that represents your creditworthiness, or how likely you are to repay borrowed money.
The most commonly used credit scoring models are the FICO® Score and VantageScore, both of which range from 300 to 850.
Credit scores are calculated based on factors like payment history, credit utilization (the amount of credit you use compared to your credit limit), length of credit history, and types of credit in use.
Here’s a breakdown of the FICO® Score ranges:
- Very Poor: 300 – 579
- Fair: 580 – 669
- Good: 670 – 739
- Very Good: 740 – 799
- Excellent: 800 – 850
A score of 700 falls within the “Good” range, which means most lenders will view you as a low-risk borrower.
But how does it compare to the national average, and how does it affect your financial opportunities?
How a 700 Credit Score Compares to the National Average
As of 2021, the average FICO® score in the U.S. was 716. This means that while a score of 700 is still considered good, it is slightly below the national average. In fact, according to Experian, 40% of consumers have a score lower than 700, positioning you ahead of a significant portion of the population.
However, achieving a score above 700 can further increase your chances of securing better interest rates and more favorable loan terms.
Experts generally advise aiming for a score of 760 or higher to qualify for the best rates on mortgages and auto loans.
How a 700 Credit Score Impacts Loans and Credit Cards
A credit score of 700 is good enough to qualify for a variety of financial products, but you may not receive the lowest possible interest rates or access to premium rewards cards. Let’s take a look at how a 700 credit score affects different financial opportunities:
1. Mortgages
Mortgage lenders consider several factors when determining your interest rate, including your credit score.
Although a score of 700 qualifies you for a mortgage, it may not secure you the best rates.
Data from the Federal Reserve shows that in 2021, 67% of mortgages were granted to borrowers with scores above 760, meaning higher scores often receive better terms.
2. Credit Cards
Most rewards and premium credit cards require applicants to have a “Very Good” or “Excellent” credit score.
With a score of 700, you still qualify for many credit cards, including travel and cashback rewards cards, but you might not get access to luxury cards with exclusive perks.
For example, the Capital One Venture Rewards Credit Card is available for people with good credit, offering 2X miles per dollar spent on purchases and a generous welcome bonus.
3. Personal Loans
A score of 700 gives you access to a broad range of personal loans, but similar to mortgages, you may not qualify for the lowest interest rates.
Lenders often offer their most competitive rates to borrowers with scores above 740.
While you can still secure favorable terms, increasing your credit score could help you save significantly on interest over the life of the loan.
How to Improve a 700 Credit Score
While a 700 credit score is good, raising it into the “Very Good” or “Excellent” range will help you unlock even better financial opportunities.
Here are a few strategies to improve your credit score:
Pay Your Bills on Time: Since payment history makes up 35% of your credit score, making all payments on time is crucial to maintaining and improving your score.
- Reduce Credit Utilization: Keep your credit utilization rate below 30%. If you’re carrying high balances, paying them down can give your score a boost.
- Limit New Credit Applications: Every time you apply for new credit, it creates a hard inquiry on your credit report, which can temporarily lower your score. Avoid opening multiple new accounts in a short period.
- Monitor Your Credit Report: Regularly check your credit report for any errors or discrepancies that could be dragging down your score. You can use free services like CreditWise® from Capital One or Experian Boost® to monitor and improve your credit.
Conclusion
A credit score of 700 is considered good and will qualify you for many loans and credit cards, often with favorable terms.
However, slightly increasing your score to 760 or higher will allow you to secure even better interest rates, saving you money in the long run.
Whether you’re applying for a mortgage, credit card, or personal loan, maintaining good credit habits like on-time payments and low credit utilization is key to improving your financial health.