Why Having a Good Credit Score is Important

Your credit score represents your financial health and proves to lenders your ability to manage debts. Showing lenders you can save money, pay debts on time, and establish a trustworthy credit history helps you borrow money.

The major credit bureaus score each person based on their credit payment history. There are more than one scoring system, but they often range from 300 to 850 in rating.

The Effect Your Credit Score Can Have On Your Life

Your credit score can impact your life in many ways, including:

  • Average to excellent credit scores can give you access to auto loans, mortgages, personal loans, and credit cards with lower interest rates.
  • A fair credit score can typically get you credit services that you need, but with higher interest rates.
  • While a poor credit score will usually get you declined for most credit cards, unless you apply for a secured credit card and provide a security deposit.

If you’re planning to buy a house, new car, or anything else that you can’t pay upfront, increasing your credit score should be your first step. If your credit score is too low, you might be declined for loans or end up paying sky high interest rates.

If you’re going to rent an apartment, landlords will check your credit score before they accept you as a tenant. If you have a bad credit score, landlords may feel that you’re a risky investment and you could have a hard time finding an apartment.

Simply put, the higher your score, the lower the interest rates and the better your chances of being approved for loans, credit cards, and other credit related products.

To give you an idea of how credit scores are weighed when credit checks are done, we’ve broken down the stats. Here you will find ranges for both FICO score ranges and VantageScore credit scoring:

What is a Good FICO Score?

FICO is one of the major consumer credit scoring agencies. Founded in 1956 and based in San Jose, CA, FICO has been providing its general-purpose FICO score since 1989. FICO scores are based on credit reports as well as other statistics like credit utilization ratio.

Infographic about FICO scores
Poor Fair AverageVery GoodExcellent
FICO Score300 – 579580 – 669670 – 739740 – 799800 – 850

What is a Good VantageScore?

VantageScore is an alternative consumer credit-scoring model that was created by and is a registered trademark of the three major credit bureaus: Equifax, Experian and TransUnion. The scoring system is kept separate from the credit bureaus.

The current model, VantageScore 4.0, debuted in 2017. It retained many of the updates from VantageScore 3.0 that consumers preferred. These features included changing the scale to fit the more comfortable 300 to 850 scoring range.

Infographic about the VantageScore
Poor Fair Good Excellent
300 -579580 – 669661 – 780781 – 850

A Closer Look at Factors That Affect Your Credit Score

The information that sends your credit score up or down is different for each scoring system. But all credit scores, no matter the model, have these factors in common:

  • Credit utilization rate
  • Type, number and age of credit accounts
  • Total debt
  • Public records such as a bankruptcy
  • How many new credit accounts you’ve recently opened
  • Number of inquiries for your credit report

Factors Specific to FICO

According to Experian, there are some factors that FICO weighs heavier than other scoring systems. Those factors are:

  • Most influential: Payment history on loans and credit cards
  • Highly influential: Total debt and amounts owed
  • Moderately influential: Length of credit history

Factors Specific to VantageScore

Also according to Experian, there are some factors that VantageScore weights heavier than other scoring systems. Those factors are:

  • Most influential: Payment history
  • Highly influential: Age and type of credit, percent of credit limit used
  • Moderately influential: Total balances and debt

Steps You Can Take to Improve Your Credit Score

You should aim to be in the good to excellent credit score ranges. At those ranges you have access to the lowest interest rates and the largest variety of credit products. If you’re in the poor, fair, or average credit score ranges, you should work on building your credit. To do this you can start with secured credit cards or cards with lower credit limits.

Also pay attention to how much you use the card, also called your credit utilization rate. Make sure you only utilize up to 30% of your credit limit. And when you do use your credit card always pay your credit card balance in full and on time to build your credit score.

If you make timely payments and use your credit card wisely, your credit score will gradually increase. This means you pay less interest on loans and credit cards in the future.

People Also Read

Continental Finance is one of America’s leading marketers and servicers of credit cards for people with less-than-perfect credit. Learn more by visiting ContinentalFinance.net

Applying for Credit Cards and Getting Approved

Continental Finance Guide to Understand Your Credit Score, Debt and Income

This guide will help you apply for an unsecured credit card that fits your profile.

The Key Topics of this guide:

  • Applying for credit cards with bad credit
  • Applying for credit cards with no credit
  • Credit card approval odds
  • Best credit cards of 2019

At Continental Finance, we strive to help searchers make sound financial decisions about their credit options and their credit history. To that end, we are crafting a series of guides that will help people on their journey to establish and build good credit.   

We begin today with the most basic: How to apply for and get approved for a credit card.

Applying for a credit card is easy. Most times all you need do is fill out an online form and click the “apply now” button. 

But getting approved for a credit card? That can be a whole lot trickier for some people.

Know what a good credit score is

1. First, Know What a Good Credit Score is

A credit score is one of the single most important factors considered by credit card issuers when they decide to approve a person’s application. There are a wide variety of credit scores and two of the most popular are FICO Score and VantageScore. 

When making a decision, banks can use different scores or analyze the score or scores differently. But credit scores on average are classified by lenders in tiers like this:

300-629Poor Credit
630-689Average Credit
690-719Good Credit
720 and upExcellent Credit

These tiers get used by card issuers in their decision process. Different cards, with different features typically have a minimum credit score to qualify for the card.

Note: Rewards-based credit cards are extremely popular. People love earning rewards from their card usage. 

And most rewards credit cards require good or excellent credit. If you have struggled to maintain a good credit history, or you are just beginning to build your credit history, you might want to delay applying for those kinds of cards until your credit improves. 

Or, instead of rewards cards, you could consider secured cards or cards designed for people with bad credit.

know your own credit scores

2. Next, Know Your Credit Scores

The two most prominent scoring models used by the major credit bureaus are FICO score and VantageScore 3.0. Getting your individual score from these two sources is often very easy.

First, FICO Score

You can pay to get your FICO score from MyFICO.com, but if you already have a credit card account, you may also already have access to free FICO scores on your monthly statement or online account. 

And Discover, an issuer of credit cards, offers a free FICO score to everybody, even if you’re not a customer.

If you already have a credit card account, you may also already have access to free FICO scores on your monthly statement or online account.

Next, VantageScore

Some personal finance websites, including NerdWallet, offer a free credit score from VantageScore. Vantage scores and FICO scores track similarly because both weigh many of the exact same factors in their calculation. Also, they tend to use the same data from the credit bureaus.

improve your credit

3. Now, Improve Your Credit

Your credit scores will rise if you:

  • Make monthly payments on time.
  • Keep balances low on existing credit cards.
  • Avoid new debt.

You’ll notice these tips focus on debt and debt management. Approximately 30% of your credit score is determined by how much you owe. 

High credit card balances can be especially damaging.

A key factor in building good credit is your credit utilization ratio — which is your balance divided by your credit limit. To improve your credit score and boost your credit profile in the eyes of card issuers your credit utilization ratio should be below 30% on each credit card you have. 

That means if you have a card with a credit limit of $500, it’s recommended to keep the balance below $150.

To lower your credit utilization, create a plan to pay down an existing balance as quickly as possible. Also, consider paying off purchases more than once a month and paying more than the minimum. Taking actions like those will keep your balance lower throughout the month and send a positive signal that impacts your credit score.

One tactic to be careful of when trying to improve your credit utilization ratio is balance transfers. Make sure you only initiate a balance transfer to a different card when you know it is going to help you manage the payments. It’s better to deal with higher utilization rate than to create a situation where you can’t meet your regular monthly payments.

Pro-Tip: A Credit Rent Boost Could Improve Your Credit Score

Another tip to improve your credit is to provide the credit bureaus examples of your ability to make payments for other bills. Free Rent Reporting can provide a near instant boost to your credit score. This service could take your application from a rejection to an approval with just a few easy steps. 

don't jump at the first offer

4. Don’t Jump at the First Offer you get

Each credit card application you fill out will require a check of your credit history. And that means each rejection you get can temporarily ding your credit report. So be wary of the offers you get and do not jump at the first offer you are sent.

Take a moment to read the terms and conditions carefully. If you have less than perfect credit you may not be approved for offers that promise large sign-up bonuses or lucrative rewards.

Consider using an online tool or mobile app to see if you might pre-qualify for an offer. Pre-qualification will ensure you get a card, and avoid any negatives on your credit report just for showing interest in acquiring a card.

Checking takes only a moment, and it will not harm your credit score.

You can also call the card issuer and ask about a specific card’s requirements.

No luck pre-qualifying? 

Continental Finance is one of the leading providers of credit cards for people with less-than-perfect credit. They can help you get closer to qualifying for a rewards card over time. This blog and other educational resources will help you qualify for a card and then use the card responsibly to help mend your credit.

include all income

5. Include all Income in Your Credit Application

Issuers consider your credit scores an indicator of your worthiness to be given a card. But scores don’t tell the whole story. 

Another important factor is your income. Card issuers use income to calculate your debt-to-income ratio. This helps determine your ability to make payments. And card issuers want to ensure they give credit to people they feel will be able to make their payments. 

To change your debt-to-income ratio you need to either increase your income or decrease your debt.

What that means is you can report other sources of income when applying for a credit card. If you earn money outside your full-time job, include that information on your application. 

You can include your household income, for example. Which means reporting income from your spouse or partner, on your credit card application.

Just remember to be careful. Resist the temptation to overstate your income. If an issuer finds that you knowingly provided false information on your application, you could be charged and convicted of credit card fraud.

Also note that income is what credit issuers consider, not employment status. So, being unemployed does not automatically disqualify you from getting a credit card.

don't give up

6. Don’t Give up After a Rejection

If you think you’ve done everything right and your application is still denied, don’t give up on your quest to obtain good credit. 

First thing to do is reach out to the issuer. You can call the issuer and ask for reconsideration directly. The issuer can give you assistance and other options to help you get credit.

Remember to have a plan before you call. Keep these points in mind:

  • you have the right to ask the issuer why you were denied
  • you can also check your free credit report at AnnualCreditReport.com 
  • see if there are any blemishes on your history 
  • formulate a convincing argument for why you want the card
  • prepare reasons for why you are fiscally responsible
  • and most of all be polite

Customer service agents are more likely to respond positively if you have a pleasant demeanor.

Still no luck? 

If your credit history isn’t perfect, and you have had trouble getting approved for a credit card, remember you are not alone. Improving your credit scores takes time. So the final piece of advice in our guide is to be patient. Waiting about six months between credit card applications can increase your chances of getting approved.

the bottom line

The Bottom Line for Obtaining a Credit Line

Credit cards aren’t like debit cards. There is an amazing amount of potential to help your full financial profile through responsible and regular use of credit. 

But first you need to get a credit card. Which makes the application process very important.

Being denied for a credit card stings. It can hurt you psychologically and it can also have a very real and negative impact on your credit score. So remember it is very important to take stock of your credit profile and full financial situation before you apply for your next card.

  • You want to choose the best card. 
  • You want to provide the most accurate information possible.
  • You want to have your ducks in a row to make the best case possible.

Take your time, showcase a responsible payment history and be persistent. That’s the key to getting your credit card application approved.

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Continental Finance is one of America’s leading marketers and servicers of credit cards for people with less-than-perfect credit. Learn more by visiting ContinentalFinance.net