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What is a good credit score (and how to get one)

Your credit score at its simplest definition is a number between 300 and 850 calculated from information that’s on your credit report, including information like your history of payments, how much debt you have and how long you’ve actually had a credit history. Like any other score, the number tells a story about your and your behaviors.

In the case of a credit score, it’s all about giving potential lenders and creditors (i.e., banks, credit card companies, credit unions, etc.) landlords and even employers insight into your behavior when it comes to managing your finances. This is an important factor to help them determine things like your creditworthiness, and also how responsible you’ll be in a given situation.

While this is not a test, it’s reasonable to want your score to be at least good, if not excellent.

But what is a good score – and how is that different from an “average” score? Just where does it fall in the credit score range?

A Credit Score Chart

This graphic from Experian tells a clear story about the typical credit score range, from the lowest credit score possible to the highest one.

What is a good credit score (and how to get one)

It’s “typical,” because the three top credit bureaus – in addition to Experian, also TransUnion and Equifax – use slightly different scoring models. It’s also possible that some of the information on your credit report may be different, as not all lenders and creditors report your information to all three bureaus. So your credit score will vary slightly.

That said, in general a good credit score is between 670 and 739. This tells potential lenders and others that you’re a relatively safe bet. And while it doesn’t guarantee you’ll get approved for credit or a super low interest rate, having a good credit score certainly opens financial doors.

According to recent information from FICO, the average credit score in the U.S. is 704, approximately in the middle of the “good” credit score range.

If you have a score of 740 up to 799, you’re considered in the “very good,” range, and 800-850 as “exceptional.” Those with the highest possible credit scores enjoy benefits that go beyond bragging rights: you may enjoy lower interest rates, higher credit limits, and more perks from lenders and credit card companies. Being responsible has its rewards.

Conversely, a fair score of 580-669 will categorize you as a “subprime borrower” and those with a very low score of 300-570 will have a hard time getting credit or loans at all. Sometimes you can’t avoid low scores, particularly if you’re just starting out or have had negative behaviors in the past like accounts in collections, or a bankruptcy or lien. In those cases, there are certainly steps you can take to improve your low credit score over time, including clearing up old debt, making sure you get credit for positive behavior like paying your rent on time, and disputing any erroneous charges on your credit history, among other smart steps.

How to Ensure You Have a Good Credit Score

It’s not hard to achieve a good credit score, but you do need to develop habits and behaviors that support continually boosting your ranking in the good to excellent credit score range. Here are the top ways to ensure you have a strong credit score:

  • Always pay your bills on time. This goes for all bills, not just credit cards. So rent, utilities, and so on also count – and can either positively or negatively impact your credit score.
  • Check your credit score regularly. You are entitled to a free copy of your credit report annually from each of the top three bureaus, so be sure to check to be sure it’s correct and/or you’re aware of any negative information on your credit history.
  • Dispute wrong charges on your credit history. You can do this yourself, and don’t necessarily need a credit repair agency to do so for you.
  • Pay off credit card balances as quickly as possible.
  • Avoid maxing out credit cards or opening too many new credit accounts in a short period of time. Both practices are red flags to lenders.

These are just a few of the top ways to make sure that you achieve and maintain a good credit score. Once you’re there, keep aiming higher, for a strong financial future.

Founder & CFA, Student Loan Planner Read full profile

What is a good credit score (and how to get one)

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A good credit score can make it a lot easier to borrow money to purchase a home or car, get a credit card, take out a personal or business loan, secure a student loan, and more. There isn’t necessarily a single credit score that’s considered “good,” however.

Instead, what constitutes a good credit score depends on the credit scoring model that’s used. We will analyze some of these and discuss how to improve your credit score no matter the model.

Types of Credit Score Models

A few different scoring models are used to calculate your credit score, with the Fair Isaac Corporation (FICO) score being a popular standard. Understanding the differences and factors used to calculate your score can help you improve your credit score over time.

FICO Credit Score

The FICO score is considered the most reliable credit scoring model because of its long-standing reputation. The model has been around since 1989 and has undergone numerous revisions during that time.

Currently, FICO credit scores range from 300 to 850. A good credit score is typically between 670 to 739 [1] , according to FICO; however, the required credit score to get approved on a loan or line of credit depends on the lender. One lender might offer its lowest interest rate to borrowers with a score above 730, while another lender might require a score of 760 to get approved.

VantageScore

The VantageScore was created in 2006 and is another widely used scoring model, after FICO. VantageScore is used on credit reports across all three credit bureaus. This algorithm uses traditional data, like number of on-time payments, credit card balances, assets, and other factors to calculate your credit score. The VantageScore 4.0 scale is between 300 to 850, with 700 considered to indicate good credit.

This scoring model includes many of the same factors as the FICO score, like past payments and credit utilization, but it weighs each category differently. It also leaves out paid collections and reduces the weight of medical collections, so your score isn’t as dramatically harmed by these marks.

Other Credit Scoring Models

Depending on the purpose of your credit inquiry, other credit scoring models might be used to determine your creditworthiness.

For example, insurance companies use their own credit score to assess your plan premiums. Insurance credit scores range from 0-999, using similar scoring factors that are used for FICO, like your outstanding debt, age of credit, types of credit you have, and payment inquiries. These factors may be weighted differently, however, and the scoring model includes other factors that aren’t included in your FICO score, like homeownership.

How to Get a Good FICO Credit Score

There isn’t a magic solution to raising your credit score to “good” standing. Even maintaining it at that level or improving your credit to “very good” or “exceptional” takes work. Instead, there are a number of financially responsible steps you can take to ensure your credit score is strong enough to get you the credit that you need.

Using the familiar FICO score [2] to determine what a good credit score is, here are a few tips to improve your credit score.

1. Always Pay Your Loans on Time

Your payment history accounts for 35% of your FICO credit score. Showing that you pay your bills on time instills confidence in lenders that you’re a good credit risk. Set up automatic payments or schedule reminders to ensure you do not miss any of your bill payments.

2. Avoid Getting Too Close to Your Credit Card Limits

“Amounts owed” is one of the five categories FICO looks at when it determines your credit score. This factor accounts for 30% of your credit score. Try to keep your credit card balances low compared to your total credit limit. In fact, it’s best to not carry a credit card balance at all by paying off your credit card statements in full every month.

If you must keep a balance on your card, it’s advised to keep your utilization rate (your total credit card balance divided by your total credit limit) below 30%.

3. Establish a Long Credit History

Having a long credit history is a positive mark for your credit score — as long as it’s a good, long history. Credit scores are partially based on your experience with credit cards and other loans — “length of history” makes up 15% of your FICO credit score.

One way you might inadvertently harm your length of credit is by closing out a credit card that you’re not using anymore. Remember, the age of your accounts is a big part of your overall credit score. Fight the urge to close your active accounts, if they’re in good standing.

4. Only Apply for Credit When It’s Necessary

Yes, having an established credit history is beneficial, but you can negate that goodwill with too much credit access to your name — especially if you’ve opened multiple accounts in a short time. Having a lot of new credit in a short amount of time might suggest that you’re in a bad spot financially, and a high default risk.

Plus, every time you apply for a loan or credit card, an inquiry will show up on your credit report, whether you’re approved or not. The inquiry can drop your credit score five points, although this decrease is temporary. Try to keep your credit applications to a minimum and look for prequalification tools that perform a soft credit inquiry so your credit score isn’t adversely impacted.

5. Diversify Your Credit Accounts

Your “credit mix” comprises 10% of your FICO credit score. The more varied your credit mix — such as credit cards, a mortgage, and a car loan — the better your credit score will be, assuming, of course, that you are making all of your loan payments on time.

Student loans are another financial obligation that might be included in your credit mix. Even if your credit isn’t at the “good” level yet, you can still apply. For example, federal student loans do not require a credit check. If you’ve maxed out your federal student loans, scholarship and grant options, private student loans can help make up the difference. Bad credit can make it harder to secure a loan, but getting a student loan with bad credit isn’t impossible [3] .

6. Review Your Credit Report

Your credit report might have items on it that are pulling your score down. Credit score mistakes can happen because of an error on your credit report. It’s smart to regularly check your credit report for any errors, like a misspelled name, incorrect or old addresses, accounts that don’t belong to you, or adverse events that should have been removed. If you spot anything wrong or suspicious, contact the credit bureaus to dispute the errors.

You’re allowed to request a free credit report from each of the three credit reporting agencies (Equifax, Experian and TransUnion) once every 12 months through AnnualCreditReport.com. You can request all three reports at once or spread them out throughout the year.

The Bottom Line

Having a “good” (or better) credit score can open a lot of financial doors for you when you need to borrow money. Not only will your chances of approval increase with a stronger score, but you’ll have access to more competitive interest rates.

If you continue to make timely payments, keep the amount of money you owe low, and minimize your loan and credit card applications, your credit score will have nowhere to go but up.

I’ll even be paying virtually $67,000 more in curiosity over the lifetime of the loan. More than half of Americans (fifty four.2%) have a good or excellent credit score rating of 700 or greater. But practically a 3rd (32.2%) had a rating below 650 eventually count, which is typically considered subprime. But it will only drive up your credit score utilization ratio, or the ratio of your outstanding balances to the available limit.

Contact every credit score reporting agency to put a freeze in your credit report. Each agency accepts freeze requests online, by cellphone, or by postal mail. The CRA should inform you the explanation they denied your request and clarify what to do next. Members who pay for the service get all three scores updated month-to-month.

The scoring fashions look at a number of elements in an effort to determine whether you are a good credit score threat. The larger your score, the less threat you are for the lender.

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Run your balances up above 30% of your out there credit, and you’ll see points begin to fall off. Pay more than the monthly minimum to lower your credit card balances.

Credit Score Ranges

Good credit habits start with the basics of budgeting, spending, and paying on time. If you’re ranging from floor zero with very little or no credit history, there are specific steps you possibly can take to make your credit shine in as quick a time as possible. As you possibly can see, if I have a FICO score within the backside tier of this table, I’ll be paying $186 extra a month for my mortgage than somebody with a rating of 760 or above.

Getting an ideal score is extremely tough, so many credit score overachievers try for a score in the excessive 700s or 800+. That puts you squarely within the highest range for many credit scoring fashions (VantageScore considers a score of to be “Grade A,” while FICO deems scores above 800 to be “glorious”). A medical historical past report is a abstract of your medical circumstances. The duty to repair any errors falls beneath the Fair Credit Reporting Act.

For instance, when you have $500 credit score stability while your limit is $one thousand, then your credit score utilization is 50%. See the net credit card functions for particulars in regards to the terms and conditions of a proposal. When you click on the “Apply Now” button, you’ll be able to review the bank card terms and conditions on the issuer’s website. The difference between good and excellent credit may be the difference between good and nice rewards, good and amazing balance transfer offers, and fairly great and outstanding advantages.

Pay your bank card bill in full and on-time to protect your good credit score. As I outlined above, a great credit score rating can have a large impact on your life, easing the process of borrowing cash, discovering a place to live, and even landing a job.

You can even get better rates of interest, decrease insurance charges and other monetary advantages. It sometimes takes a minimum of 6 months of credit activity before a credit rating may be calculated, in accordance with credit score scoring skilled Barry Paperno. Allowing for saving and enjoyable, keep a workable budget to ensure you don’t overspend on your credit card. To give your rating that additional little enhance, take out an installment mortgage, such as a automobile loan or a credit-builder mortgage. Good credit score merely implies that your rating, generated by a scoring model, corresponding to VantageScore or FICO, is excessive enough that you can profit from higher monetary products.

Check My Credit Score Credit Karma

  • Here’s everything you have to find out about how a zero stability impacts credit.
  • However, it’s additionally crucial to know what damages your credit report so you can keep away from it.
  • applying for a new loan or bank card every month, your credit scores may take a hit.
  • In the end, it truly is that easy, so the extra you do to show that you’re that type of borrower, the higher your credit score scores will be.

How To Increase Credit Score

That’s why it’s essential to not only know what affects your credit, however how to build an excellent credit rating from the get-go or restore a bad one if the necessity arises. That means preserving your monthly balance underneath $1,500 if your credit limit is $5,000.

April 9, 2018 by Tom Harkins

Maintaining a good credit score is more critical than ever. A good credit score enables you to obtain additional credit for important life purchases, such as a car or a home. You can often score better insurance rates with a high credit score, and forego deposits on your utilities the next time you move into a new residence. Your credit score can even affect your job prospects.

However, despite its importance, a staggering number of Americans have poor credit. Approximately one-third of Americans have a credit score below 601, which falls between fair and poor credit. It doesn’t have to be that way, though. Here are five tips you can use right now to improve your credit score, and keep it that way.

1. Understand what goes into your credit score

Before you maintain or repair your credit score, you need to understand it. Your FICO credit score is a number ranging from 300 (the “bad” end) to 850 (the “good” end). The score derives from an analysis of five information categories on your credit report: payment history, credit utilization, credit history, new credit established or requested, and credit mix.

While all these factors play a part in determining your credit score, they’re not all equally important. Your payment history, for example, comprises about 35% of your score. You credit utilization counts for 30% of the score, so it’s quite important as well. The other three factors each comprise only 10-15% of your credit score. Understanding how much each of these factors impacts your overall credit score will help you focus your efforts and make it easier for you to maintain or improve your overall score.

2. Pay your bills on time

As detailed above, payment history counts for more than a third of your credit score. How well or poorly you pay your bills is often the difference between good credit and bad. Any of your payees, from credit card companies to your Internet service provider, can report late payments to a credit bureau and affect your overall credit score. The takeaway is obviously to pay your bills on time.

3. Manage your debts

Credit utilization is another major factor in your overall credit score; the higher your outstanding debt is, the lower your score. As a rule, you shouldn’t utilize any more than 30% of your credit limit on any card. For example, on a card with a credit limit of $1,000, you should never have more than a $300 balance during any billing period.

If you have several maxed out credit cards, your score is likely suffering because of it. It can be a long, difficult process to pay down your balances on them all, too. If you need to address high levels of outstanding debt in an effort to improve your credit score, you may want to consider a debt consolidation loan. Debt consolidation can help you manage your payments, often at a lower interest rate, and help ensure that you’re paying back the debt that’s holding your credit score down.

4. Keep those credit cards open

Even if you consolidate all your credit card debts into a single loan, make sure you don’t close out your old credit card accounts. Time is a significant factor in your credit history, and if you close out an older credit account that you don’t use, it will shorten your credit history, likely lowering your score. Go ahead and cut up the cards, but leave the account open.

5. Monitor your credit report, and fix errors

You’re entitled to one free credit report every 12 months from each of the three major credit-reporting companies. Make sure you download these reports in intervals and use them to monitor your efforts to maintain or improve your credit score. You’ll be able to determine where your hard work is paying off, and the areas you need to focus harder on to improve your score.

Monitoring your credit report will also enable you to spot errors that may be erroneously dragging your credit score down, too. If you spot an error on your report, you can fix it. You can send a letter to the credit bureau in question, detailing all the errors in the report that you’re disputing. The credit bureau should respond to you within 30 days.

You should also contact the creditor in question, informing it that you’re disputing the report, and provide a copy of the information as well. Addressing errors on your credit report is a straightforward, cost-free way to improve your credit score in a short period.

Improving your credit and maintaining a good credit score can be challenging, but it’s definitely worth the effort. Improving your credit score even just from bad to fair can be the difference between having to extend your apartment lease for another year and being able to secure a mortgage for your own home. Follow these five tips and get your credit on the right track today!

What is a good credit score (and how to get one)

The Balance / Caitlin Rogers

Your credit score is one of the most important numbers in your life. This three-digit number indicates your creditworthiness or the likelihood that you’ll repay the money you borrow. Credit scores generally range from 300 to 850. The higher your credit score, the more likely it is you’ll be approved for new and better credit.  

As of April 2018, 21.8% of Americans had a FICO score above 800, according to data from FICO. This makes a record-high percentage of people with credit scores over 800 and correlates directly to fewer blemishes on people’s credit reports, from improvements in payment history to fewer inquiries.  

Since payment history makes up 35% of the credit scoring calculation, there’s a strong relationship between having a high credit score and a low number of late payments.

The Benefits of an 800 Credit Score

So what exactly do you gain by having an 800 credit score? Is this something you should strive for? Here are three benefits of having an 800 credit score:

  • You’re more likely to have your applications approved. Remember that credit scores indicate your creditworthiness. Along with your other financial information, your credit score helps lenders predict whether you’ll repay the money you borrow. With a high credit score, lenders see you as a less risky borrower, increasing the chances that they will approve your credit.
  • You’re more likely to qualify for lower interest rates. Your credit score is a major determining factor in the interest rate on loans. Having an 800 credit score will help you qualify for lower interest rates and save you thousands of dollars over the life of your loan. You’ll see the biggest impact with larger loans that you repay over a longer period of time, such as mortgage and auto loans.
  • You’ll receive better credit card offers and pay less in interest. Regardless of credit score, everyone can avoid paying credit card interest by paying their credit card balance in full each month. An 800 credit score can help you qualify for credit cards that offer a 0% promotional rate on purchases and balance transfers. Having one of these credit cards in your wallet gives you the flexibility to carry a credit card balance and pay it off over time while avoiding finance charges on your balance.

How to Build and Maintain an 800 Credit Score

The elusive 800 credit score isn’t reserved for people who make a lot of money or have some special privilege with the credit bureaus. Anyone who manages their credit properly can reach and maintain an 800 credit score. Here are a few tips:

  • Pay everything on time. Your payment history accounts for the largest portion of your credit score. The more on-time payments you have on your credit report, the better it is for your credit score.
  • Keep your credit card balances very low. Generally speaking, keeping your balances below 30% of the credit limit is best for your credit score. So, if your card limit is $10,000, you’d want your balance to stay below $3,000. If you want to reach and maintain an 800 credit score, aim to keep your credit card balances even lower than that amount. According to Experian, people with scores above 800 utilize 11.5% of their total credit on average.  
  • Avoid too many credit inquiries. Each time you make an application that requires a credit check, a hard inquiry is placed on your credit report. These hard inquiries are about 10% of your credit score. It’s not a large amount, but it can be the difference between an 800 and a 780 depending on the other information on your credit report. When you’re ready to apply for a credit card or a loan, do your homework ahead of time so you can apply just once and avoid multiple credit inquiries.
  • Monitor your credit and act quickly to clear up errors. Your credit score is based on the information in your credit report at any given time. That means you can lose your excellent credit score if there are significant changes to your credit report, particularly errors. Keep an eye on your credit information by using free and paid resources—CreditKarma.com, CreditSesame.com, WalletHub.com, AnnualCreditReport.com, and myFICO.com. If you spot errors, use the credit report dispute process to clear them up right away.
  • Let negative information age off your credit report. You may have a hard time achieving an 800 credit score with late payments or other negative items on your credit report. Fortunately, most types of negative information will fall off your credit report after seven years. If you can’t remove negative items because they’re accurate, be patient and keep paying everything else on time.  

How Long Does It Take to Get an 800 Credit Score?

Depending on where you’re starting from, It can take several years or more to build an 800 credit score. You need to have a few years of only positive payment history and a good mix of credit accounts showing you have experience managing different types of credit cards and loans.

A good credit mix includes a few major credit cards, a real estate loan, and another type of installment loan. These accounts must be a few years old to show that you can handle a variety of credit responsibilities over a long period of time.  

Is That High Score Worth the Effort?

The good news is that many lenders consider 760 the cutoff for excellent credit. With a credit score above that number, you’ll receive most of the same benefits as someone with an 800 credit score. You’ll just have to work a little harder and wait a little longer if you also want the bragging rights.

by Lyle Daly | Jan. 19, 2021

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

What is a good credit score (and how to get one)

Image source: Getty Images

To improve your odds of getting a Capital One card, you should know about the other factors that could affect your application.

With competitive rewards and zero-interest offers, Capital One credit cards are popular with consumers. If you’ve found one you like and have excellent credit, you may think you won’t have any trouble getting the card.

That’s not always the case. It’s true that a credit score of 800 is more than enough for any Capital One card. In fact, you can qualify for the card issuer’s best rewards credit cards with a score of 670 or higher.

However, there’s more to the application process than that. Capital One could deny you for reasons that have nothing to do with your credit score. To avoid wasting your time, it’s important to know what these reasons are.

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Capital One application rules

There’s one Capital One application rule that applies to all its credit cards: You can’t make more than one application every six months.

After you apply for a Capital One card, you need to wait at least six months before applying for another, regardless of whether Capital One approved you or not. A high credit score won’t get you around this restriction.

Capital One also has rules about the maximum number of Capital One cards you can have and the minimum income requirements for its cards. The tricky part is these rules vary depending on the Capital One card you want.

Here’s what this means:

  • Credit card limits: With some cards, such as the Capital One® Venture® Rewards Credit Card, you’ll be ineligible if you already have five or more Capital One cards. With others, you’ll be ineligible if you have two or more Capital One cards.
  • Minimum income requirements: For some of its cards, Capital One requires that your monthly income exceeds your rent or mortgage by at least $425. For others, your monthly income must be at least $800 greater. Note that Capital One reserves the right to deny your application for insufficient income even if you meet these requirements.

You can find the exact rules for the card you want on Capital One’s site. Just visit the card’s page, go to the “Rate and fee information” section, and then scroll down to “Additional Disclosures & Terms and Conditions.”

You’ll see a list of what can disqualify you from getting that Capital One credit card. If there are any credit card limits or income requirements, you’ll find out here. Like the application rule, you can’t get around these restrictions, regardless of your credit score. You need to pass these rules for Capital One to approve you.

What to do if Capital One denies your application

If you couldn’t open a Capital One card because of its application rules, the only way to get approved is by correcting the problem. How you do that will depend on what the problem was.

  • You’ve already applied for another Capital One card in the last six months: Wait until six months have passed, and then try applying again.
  • You’re at the Capital One credit card limit: You’ll need to cancel one of your Capital One cards if you want to add a new one.
  • Your income wasn’t high enough: Make sure you included all forms of eligible income on your credit card application. If you didn’t, you can call Capital One to correct your reported income and see if that gets you approved. If you did, your only options are to increase your income or find a Capital One card with lower income requirements.

Those aren’t the only reasons Capital One would deny your credit card application. Even when you have a great credit score, there could be other reasons, such as too many recent applications for other credit cards.

If the denial was not due to Capital One’s application rules, you can try calling for a reconsideration. The best number to call is 1-800-625-7866, which is Capital One’s application services line.

When you call, ask the representative if they could reconsider your denied application. It can help to point out that you’ve handled credit well in the past (and have an excellent credit score to show for it). Depending on why you were denied and the representative you speak to, you could end up getting your application approved after all.

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The day approached fast and with no warning: being an adult. In the adult world, you need to think twice before swiping your brand new credit card. The real world draws many endless questions from young adults who are ready to be independent and live under their own roof but don’t know where to start. One topic that really stands out amidst the confusion: credit scores. Unfortunately, you cannot avoid credit scores if you plan on making any “bigger” purchases and decisions in the future.

Read on for expert insights on navigating the world of credit scores:

What is a good credit score?

Credit scores represent the risk that a lender may take when you try to borrow money. Let’s break down the numbers: First off, a credit score ranges from 300 to 850. You want to avoid being closer to 300 at all costs; the higher your score, the better off you’ll be. An average credit score typically lies between 600 and 750; anywhere below 600 tends to be frowned upon in the adult world.

However, if you have a low credit score it can improve with some hard work. “In school, your GPA is made up of various grades from different classes, similar to the way that your credit score contains different measurements,” said Simon Hunag, a finance professor at the University of Massachusetts, Amherst. A step towards improvement would be thinking about raising your credit in a similar way that you would work to raise your GPA. It will take some time and real effort, but definitely worth it in the long run.

How can I build credit in college?

We all have to start somewhere with any new thing in life, and the same applies to credit scores. Everyone begins their credit score journey with no credit score at all. So if you find yourself freaking out about not having any credit at the moment… calm down and stop worrying. Everything in life comes with time.

Despite what you may believe, you can definitely begin building your credit while in college. If you stay aware of what credit is and inform yourself of the opportunities you’ll have with good credit, you can work towards building it up. “I signed up for a Wells Fargo credit card before I was 18, and it was a huge benefit for me because I was responsible with it,” Huang said. Huang attended UC Berkeley, and built up his credit at a young age. If you focus on paying on time, then your credit score will take care of itself. By the time Huang wanted to get a mortgage or loan, this opportunity was available to him thanks to his credit score.

Additionally, paying attention to your credit score and building it up as student will benefit you in the long run. If you make payments on a student loan while in college, you will be paying off debt, which has a positive impact on your credit score. “Even if you’re just going out to eat, or purchasing anything small, always think to use your credit card,” said Anthony Fama, Vice President of Credit and Risk Management at Raistone Capital. By paying off small increments over time, your credit score will thank you in the long run. In other words, it adds to your “good deed history.” By the time you get to your late 20’s and have eight or nine years of on-time payments under your belt, you’ll be thankful for putting in the effort in college.

What hurts my credit?

Missing a credit card payment or car payment tends to be the two top mistakes that can drastically hurt your credit score. When using credit cards, take note of how much you spend and if you can pay it off on time. At the end of the day, you need to have the money to pay for what you purchase.

Overall, poor financial management really drives whether you obtain high credit or if your actions hurt your credit. Unfortunately, credit cards allow the opportunity for reckless spending. “I had friends in college who spent money beyond what they really had in their bank accounts,” Fama said. “Especially in college, a good skill to get in the habit of is being cautious and considerate of your finances.” Anyone can achieve good credit if they simply pay attention.

For college students, Huang recommends Credit Karma, an online platform that provides users with information about what affects their credit and how much balance they have. Credit Karma also gives recommendations on how to wisely use credit and maximize improvement. To top it off, you have the rare opportunity to check your credit report for free. For anyone looking to learn more about their credit score and the factors going into it, Credit Karma lays it out.

What does having good credit mean for the future?

Many great benefits go hand-in-hand with having good credit: like the increased opportunity for fancy, new credit cards and the opportunity to take out loans. Going off of these, people don’t realize that you also get more power with a higher credit score. Your credit score measures how reliable you are when it comes to paying off bills. Therefore, you get an upper-hand when it comes to negotiating for a lower price or a higher loan. Additionally, lower interest rates go along with good credit scores, so you’ll pay less money in the long run!

You need good credit to do many adult things, like taking out a mortgage, buying a car or opening a credit card with reward points. If you want to take out a loan one day, you need to ensure that you are a diligent individual who manages and consistently monitors credit in order to obtain that loan. “Lending plays a significant role in our economy,” said Scott Karch, National Sales Manager at Kwik Wholesale. “Most lenders and lending institutions will utilize a consumers credit rating along with other factors as part of their decision [making] process.” In addition, a good credit score can also help you to purchase smaller items, like furniture or a washer and dryer. “Once you graduate, eventually you’re going to want to buy your own car and live in your own place,” Fama said. “With that being said, you’ll probably need loans to make it easier to accomplish all of this.” Little do people realize, you can go on a payment plan even for things to fill up your new apartment with.

The bottom line

Anyone can earn a good credit score, if they follow the first step: being informed. We recommend you track your progress, so make sure to check your credit at least annually; platforms like Credit Karma make this an easier habit. In order to raise your credit score, remember to stay informed and get started as early as possible; then, you’re well on your way to success.

Maintaining a good credit score is more critical than ever. A good credit score enables you to obtain additional credit for important life purchases, such as a car or a home. You can often score better insurance rates with a high credit score, and forego deposits on your utilities the next time you move into a new residence. Your credit score can even affect your job prospects.

However, despite its importance, a staggering number of Americans have poor credit. Approximately one-third of Americans have a credit score below 601, which falls between fair and poor credit. It doesn’t have to be that way, though. Here are five tips you can use right now to improve your credit score, and keep it that way.

1. Understand what goes into your credit score

Before you maintain or repair your credit score, you need to understand it. Your FICO credit score is a number ranging from 300 (the “bad” end) to 850 (the “good” end). The score derives from an analysis of five information categories on your credit report: payment history, credit utilization, credit history, new credit established or requested, and credit mix.

While all these factors play a part in determining your credit score, they’re not all equally important. Your payment history, for example, comprises about 35% of your score. You credit utilization counts for 30% of the score, so it’s quite important as well. The other three factors each comprise only 10-15% of your credit score. Understanding how much each of these factors impacts your overall credit score will help you focus your efforts and make it easier for you to maintain or improve your overall score.

2. Pay your bills on time

As detailed above, payment history counts for more than a third of your credit score. How well or poorly you pay your bills is often the difference between good credit and bad. Any of your payees, from credit card companies to your Internet service provider, can report late payments to a credit bureau and affect your overall credit score. The takeaway is obviously to pay your bills on time.

3. Manage your debts

Credit utilization is another major factor in your overall credit score; the higher your outstanding debt is, the lower your score. As a rule, you shouldn’t utilize any more than 30% of your credit limit on any card. For example, on a card with a credit limit of $1,000, you should never have more than a $300 balance during any billing period.

If you have several maxed out credit cards, your score is likely suffering because of it. It can be a long, difficult process to pay down your balances on them all, too. If you need to address high levels of outstanding debt in an effort to improve your credit score, you may want to consider a debt consolidation loan. Debt consolidation can help you manage your payments, often at a lower interest rate, and help ensure that you’re paying back the debt that’s holding your credit score down.

4. Keep those credit cards open

Even if you consolidate all your credit card debts into a single loan, make sure you don’t close out your old credit card accounts. Time is a significant factor in your credit history, and if you close out an older credit account that you don’t use, it will shorten your credit history, likely lowering your score. Go ahead and cut up the cards, but leave the account open.

5. Monitor your credit report, and fix errors

You’re entitled to one free credit report every 12 months from each of the three major credit-reporting companies. Make sure you download these reports in intervals and use them to monitor your efforts to maintain or improve your credit score. You’ll be able to determine where your hard work is paying off, and the areas you need to focus harder on to improve your score.

Monitoring your credit report will also enable you to spot errors that may be erroneously dragging your credit score down, too. If you spot an error on your report, you can fix it. You can send a letter to the credit bureau in question, detailing all the errors in the report that you’re disputing. The credit bureau should respond to you within 30 days.

You should also contact the creditor in question, informing it that you’re disputing the report, and provide a copy of the information as well. Addressing errors on your credit report is a straightforward, cost-free way to improve your credit score in a short period.

Improving your credit and maintaining a good credit score can be challenging, but it’s definitely worth the effort. Improving your credit score even just from bad to fair can be the difference between having to extend your apartment lease for another year and being able to secure a mortgage for your own home. Follow these five tips and get your credit on the right track today!

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

  • Capital One’s minimum credit score and loan amount are low, so it’s ideal for buying a used car.
  • However, purchases with a Capital One auto loan must be made through one of its authorized dealers.
  • People with better credit scores could get slightly lower rates elsewhere.
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Specifically, Capital One is one of the best auto loans for people with bad credit.

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Capital One offers a small range of auto loan interest rates, and rates start relatively low. With this lender, people with low credit scores could get a good deal, as long as the required minimum credit score of 500 is met.

Should you get an auto loan through Capital One?

A Capital One auto loan might be for you if you have a nonprime (between 660 and 601) or subprime (between 600 and 501) credit score. In these credit categories, borrowers may be rejected by many lenders or offered high interest rates.

Capital One works with borrowers with credit scores as low as 500. Auto loan interest rates at Capital One tend to start lower than the typical interest rates, and could help people in this credit category get lower interest rates, too.

Pros of a Capital One auto loan

Competitive interest rates

Data from Experian shows that people in the nonprime credit category get an average interest rate of 10.13% for a used car. People with subprime scores tend to have even higher interest rates, at 16.40% for a used car.

Capital One auto loans could help borrowers with credit scores in these categories beat the average, since interest rates start as low as 2.99% APR for new vehicle purchases and excellent credit.

Easy online application for pre-qualification

Shopping around for an auto loan and comparing offers is the best way to know that you’re getting a good deal. With Capital One, it’s easy to pre-qualify online and walk into a dealership with an idea of what you might pay.

If you pre-qualify in advance, you have more bargaining power with the dealership when it comes to talking interest rates. The interest rate on your auto loan is negotiable, and you could use your pre-qualification offer to beat an offer or be confident that you’ve got the best deal.

Loans as small as $4,000 available

For people with an eye on an affordable used car, Capital One’s low minimum financing amount of $4,000 could make it easier to find a car that fits your budget and financing options — many other lenders have higher minimum loan requirements.

Auto loans from a well-known lender, and a large network of dealerships

While you do have to make a purchase through a dealership that works with Capital One to use this lender, Capital One has a large number of dealer partners.

Cons of a Capital One auto loan

Until you apply, there’s not much information available

Capital One doesn’t have information on interest rates or fees available on its website. While most other lenders will state the range of interest rates available to prospective customers or information on loan fees, Capital One does not make that information publicly available.

Loans have to be used at a participating dealer

It’s not uncommon for auto loans to require your car be purchased through a network of dealerships the bank works with. However, that could limit your options for which car you can buy. Make sure that the vehicle you want to finance can be purchased through one of the available dealership partners before pre-qualifying.

Capital One auto loan requirements

Capital One auto loans are only available at dealerships, and only certain dealerships. While this lender does have a wide array of dealers available, there’s no option for other financing for private party purchases, and could limit your ability to purchase from some independent dealerships. Information on dealers that work with this lender is available on Capital One’s website, and is worth checking out in advance if you want to work with a specific dealership or find a specific vehicle.

Other requirements include:

  • A minimum income between $1,500 and $1,800 a month, depending on credit
  • A minimum financing amount of $4,000
  • Residency in a US state other than Alaska or Hawaii
  • Used vehicles must be model year 2011 or newer and have less than 120,000 miles. However, Capital One states that financing may be available for vehicles model year 2009 or newer and with 150,000 miles.

Capital One auto loans vs. the competition

To compare Capital One to the competition, we looked at lenders with similar credit score requirements that allowed customers to get pre-qualifications before going to a dealership.

Here are the two lenders that are the closest competition:

APR range Minimum credit score Loan amounts available
Capital One Starting at 2.99% 500 $4,000 min
Bank of America Starting at 2.59% APR for new car purchases, 2.89% for used car purchases No min requirement $7,500 min
Myautoloan.com For a 60 month loan, rates start at 2.99% for new car purchases, 3.24% for used car purchases 575 $8,000 min

Capital One auto loans vs. Bank of America auto loans

Bank of America auto loans are a good option for current customers, as interest rate discounts are based on customer relationships with the bank and categorized by status. Customers with gold, platinum, or platinum honors status will receive up to .5% off their auto loan’s APR. But, status requirements mean that discounts are only available to customers with three-month average balances of $20,000 or more.

Capital One has an advantage over Bank of America for borrowers looking for affordable used cars. While Bank of America has a minimum loan amount of $7,500, Capital One only requires minimum loans of $4,000. While Bank of America will finance cars valued as low as $6,000, the $7,500 minimum loan amount means that borrowers could be underwater, or have a loan worth more than the car’s value.