An 800 credit score is about as rare as a unicorn sighting! Only about 20% of Americans have a credit score of 800 or higher, so if you’re one of the lucky few, feel free to brag about it to your friends (or maybe just quietly pat yourself on the back). But for the rest of us mere mortals, there’s always room for improvement when it comes to our credit scores.
Is 800 Credit Score Rare?
Many people believe that an 800 credit score is extremely rare, but the truth is, it’s not as uncommon as you might think. In fact, as of 2021, approximately 21% of consumers have a FICO score of 800 or higher! While that may not seem like a large percentage, it’s important to remember that there are millions of people in the United States alone with credit scores, so 21% is actually a significant number.
So why do so many people believe that an 800 credit score is rare? One reason could be that it’s often categorized as “exceptional credit” by credit bureaus, making it seem like it’s not within reach for most people. Another reason might be that people with excellent credit tend to be low-key about it, not bragging or bringing it up in conversation. But the truth is, an 800 credit score is an achievable goal for many people with good credit habits.
- Pay your bills on time: Late payments can have a significant negative impact on your credit score, so always make sure to pay your bills by their due date.
- Keep your credit utilization low: Your credit utilization ratio is the amount of credit you’re using compared to your total credit limit. Keeping this ratio low shows lenders that you’re responsible with credit and can help boost your score over time.
- Mix up your credit: Having a mix of different types of credit, such as a credit card, auto loan, and mortgage, can help improve your credit score as it shows that you can handle different types of credit responsibly.
What is a Credit Score?
A credit score is a number that represents your creditworthiness or creditworthiness history. Creditworthiness refers to your ability to repay debts, and it is determined by various factors such as credit history, payment history, credit utilization, credit mix, and new credit. Your credit score can determine your ability to qualify for loans, credit cards, and other financial services. A higher credit score indicates that you are less risky to lenders and are more likely to get approved for favorable financial deals such as low-interest rates and higher credit limits.
Credit scores range from 300 to 850, and a score of 800 or more is considered excellent. Very few people achieve this score, and it takes a lot of time and effort to build credit to reach this level. An 800 credit score represents a long history of making on-time payments, using credit responsibly, and keeping credit utilization low. It also takes into account a diverse credit mix of different types of loans such as mortgages, auto loans, and personal loans. Achieving an 800 credit score is an exceptional feat, and it can open doors to better financial opportunities and rewards.
Understanding Credit Score Ranges
Knowing your credit score range is essential for healthy financial management. The score range indicates how good your credit score is and how financial lenders see you. Generally, there are five credit score ranges – very poor, poor, fair, good, and excellent. Here’s what you should know about each range:
- Very Poor: If your credit score falls in this range between 300-579, you have the hardest time borrowing money, and you’re likely to get turned down or face higher interest rates. It’s essential to work on improving your credit score by paying bills on time, using credit responsibly, and disputing any credit report errors.
- Poor: A credit score of 580-669 falls in this range, which means you may face some challenges borrowing money or pay higher interest rates. You can improve your credit score by reducing debts and paying bills promptly.
- Fair: A credit score between 670-739 falls in this range, indicating you have a fair credit score. You may get approved for loans, but you may get higher interest rates than someone with an excellent credit score.
- Good: With a credit score range between 740-799, you have a good score, and you’re likely to get approved for loans at lower interest rates.
- Excellent: This score range between 800-850 represents excellent credit, meaning you’re in a good position to borrow money at favorable rates and terms.
Understanding your credit score range and improving your credit score can save you thousands of dollars in interest over your life. So it’s essential to check your credit report regularly, fix any errors, make payments on time, and avoid excessive debts to improve your credit score.
Why is a High Credit Score Important?
Having a high credit score is important for various reasons. For starters, it gives you more advantage when it comes to accessing credit facilities such as loans, credit cards, and mortgages. Lenders tend to offer lower interest rates and more favorable terms to individuals with high credit scores, as they consider them less of a risk. If you have a low credit score, on the other hand, lenders may either deny you credit altogether or charge you higher interest rates and fees.
Additionally, having a high credit score can also positively impact your everyday life. For instance, insurance companies may offer you lower premiums if you have a high credit score as they consider you more responsible and less likely to file a claim. Landlords may also prioritize applicants with high credit scores, especially if they are seeking long-term tenants. Essentially, a high credit score translates to better financial opportunities and peace of mind.
Factors That Affect Your Credit Score
There are several factors that can affect your credit score, and it’s important to understand them in order to maintain a good score. One of the biggest factors is payment history. Your creditors want to see that you are making your payments on time, so a late payment can have a big impact on your overall score. In fact, just one missed payment can cause your score to drop significantly.
Another factor that affects your credit score is credit utilization, which is simply how much of your available credit you are using. Ideally, you should be using less than 30 percent of your available credit, as using more than this can indicate that you are relying too heavily on credit. It’s also important to note that opening too many new accounts at once can have a negative impact on your score, as it can indicate that you are taking on too much debt.
- Payment history: paying all your bills on time is crucial. Late payments stay on your credit report for seven years
- Credit utilization: strive to use less than 30% of your available credit
- New accounts: opening too many accounts within a short period of time can have a negative impact on your credit score
How to Achieve a High Credit Score
Maintaining a high credit score can seem daunting, but it’s achievable with the right steps. Here are some tips to follow:
- Punctual payments: Pay your bills on time every month. Missed payments stay on your credit report for up to seven years and negatively impact your credit score.
- Low credit utilization: Using up a significant portion of your available credit can signal to lenders that you’re unable to manage your finances effectively. Try to keep your credit utilization below 30%.
- A varied credit mix: Including a mix of credit types like credit cards, loans, and mortgages in your credit portfolio shows that you can manage different types of credit and these accounts will add positive information to your credit report if you use them responsibly.
- Long credit history: The longer you’ve had credit accounts, the more experience you’ve had managing them, so avoid closing accounts that you’ve had a long time because they help to maintain your credit history length.
- Careful credit applications: Multiple hard inquiries on your credit report in a short period can reduce your credit score, so try to only apply for credit when necessary.
Remember that building a good credit score takes time and diligence, but taking these steps will put you on the right path.
So, is an 800 credit score rare? In short, yes. While it’s not impossible to attain, it requires a strong credit history and responsible financial habits. However, it’s important not to become solely focused on achieving a perfect score. Your credit score is just one aspect of your overall financial health. Remember to prioritize your budgeting, savings, and debt management, and your credit score will follow suit.