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Is 700 A Good Enough Credit Score?


Posted on April 21, 2011

 

In the years before the mortgage industry meltdown when it was relatively easy to get credit, a credit score of 700 was considered to be good to excellent. Many lenders would be happy to approve loan or credit applications for consumers with a 700 score without so much as a blink of an eye. However, because of the latest recession and the enormous amount of defaults occurring among consumers, the rules changed pretty fast. It’s important to understand how these changes affect your credit score and your credit repair work.

Is It Enough to Be ‘Good Enough’?

While a 700 credit score is certainly not at the bottom of the barrel, it is no longer considered the get-to score by those working to improve their credit. In years past, creditors were happy with a 700 or higher but because of the increase in defaults and the overall loss of profits in the mortgage and banking industries, lenders are very wary of taking risks. Borrowers now need to come to the table with provable credit worthiness.

A score these days of 720 or higher is the new standard and many lenders are very strict with their requirements. Mortgage lenders especially are looking closely at income levels and credit scores before making a loan commitment at the best interest rates and terms.

How Flexible Are Lender Requirements?

With 720 being the new credit score target, some lenders will not be flexible at all. If there is not a good credit score, there will be fewer chances for the best rates, the better deals, and the most financing options. Lenders may also tack on added costs to cover their business if the borrower is viewed as any type of a risk. Mortgage lenders will likely want to see more of a cash down payment on the purchase price of a home, meaning the borrower has to shell out more money due to their credit score deficiencies.

Some lenders are still willing to consider things beyond a credit score. They also want to take fewer risks but may base their decisions on other factors instead of using a credit score as the main focus. If your credit score is not over the 720 range, it is important that you have other provable resources to back your financial abilities including sufficient income, small expenses, and are in good standing with your current creditors.

How Achievable is a 720?

All consumers have the power to improve and repair their credit which will increase their credit scores. The essential thing to remember is that time is really the main factor that will help your score get a boost as there is no overnight solution. Along with letting time pass, you also need to remain vigilant about making your payments on time with creditors each month and pay more than the minimum on your credit card balances. It is also important that you don’t overextend your credit by spending more than you can reasonable pay. When all of these elements are combined and used consistently, you will begin to see a gradual rise in your credit score. It would be beneficial to get your credit scores once or twice a year to ensure you are on the increase rather than a decline.

Credit scores need proactive care and careful financial management in order to increase to a score considered to be ‘excellent’ by lenders and creditors alike. The higher your score, the more likely you are to save hundreds or thousands of dollars a year in interest charges, penalties, and loan conditions.

Credit Isn’t The Only Thing Lenders Consider

Even people who have excellent credit get turned down for credit cards and loans. That’s because credit card issuers consider more than just your credit score when they’re processing your credit card application. Or, you may have to pay a higher down payment. If you have too much debt, you could be turned down or have to pay a higher interest rate. If you don’t have a job, but you have an excellent credit score, you’ll still be turned down for a credit card or loan because income is a requirement. If your income isn’t high enough, then you could be turned down for a credit card or loan.

Other Financial Puzzle Pieces That Matter

You could spend the next few years focusing on your credit score and never think about other things that are important. For example, paying off your debt. What good is an excellent credit score if you have too much debt to borrow anything? Or if you have so much debt that you’re struggling to make ends meet? Having a great credit score wouldn’t be of much help.

Too often, people are afraid to do what it takes to get out of debt because they’re afraid of what it’s going to do to their credit scores. A common myth is that credit counseling can hurt your credit score and so people avoid it. Credit counseling doesn’t hurt your credit score, but if it did, should it really be discounted because of the temporary damage it could do. The same thing goes for other debt solutions like debt settlement and bankruptcy. Both are notorious for the damage they could do to your credit score and so consumers avoid them when they really have no other choice.

Many people forgo retirement savings when they’re focusing on credit repair, never realizing that retirement isn’t as far away as it seems. If you’re not putting away enough money for retirement, you may find yourself retired, with an excellent credit score and not enough money to cover all your expenses.

Keep Credit Score in Perspective

Yes, your credit score is important because lenders and other businesses use it to make decisions about your applications and to decide what prices to charge you. But, it’s not the only thing that matters and isn’t always the most important thing. Swimming in debt with an excellent credit score won’t make you feel any better and you’ll still lose sleep. Having an excellent credit score and no money for retirement is just as bad. As you focus on repairing your credit, don’t forget all the other aspects of your financial life that are just critical to your stability and peace of mind. In the end, it’s often easier to repair your credit than it is to pay off debt or save for retirement.

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