If there is one three-digit number that can make or break your dreams, that would be your credit score. You may not realize this, but your score actually affects your life in more ways than one.
People use their credit scores to help them make big financial decisions, including when:
- buying a car
- making a home purchase
- finding a new apartment to rent
- opening a new line of credit
- getting hired for your dream job
- applying for new utility
- buying insurance
When you do any of the above, lenders and creditors will pull your credit score to help them decide whether you are a responsible borrower. That’s why keeping tabs on your credit score and doing everything you can to raise it is important.
What Influences Your Credit Score?
A variety of things can have an impact on your credit score. In a nutshell, the following can influence your score:
- Your payment history (35%). Your payment history refers to whether or not you pay your bills on time. This is the biggest factor at play when it comes to credit score calculation.
- The amount you owe (30%). This refers to the amount of money you owe to creditors and lenders.
- Length of credit history (15%). This takes into account how long your accounts have been open.
- Your credit mix (10%). This lists the types of credit you have, such as mortgages, auto loans, and credit cards.
- New credit (10%) This looks at how often you apply for new credit and the recent inquiries into your credit report.
How Do You Know Your Credit Score?
Creditors base your credit score on the information in your credit report. Different entities, such as credit bureaus like Experian and Equifax, collect this data. You can obtain your credit report once a year for free from the three major credit bureaus – TransUnion, Experian, and Equifax.
Credit scores are most often based on the FICO scoring system. This system ranges from 300 to 850. Other scoring models, such as VantageScore 3.0, range from 300 to 850.
So now the question is: What happens if your credit score falls within the 656 range? Is a 656 credit score good or bad? Read on to find out!
Is a 656 Credit Score Good or Bad?
A credit score of 656 falls in the range of “fair” to “good,” depending on which scoring model is used. Generally, a score between 620-659 is a fair score, while a score of 660-719 is good. A higher credit score is typically better and can open many doors for you.
What Can You Do With a 656 Credit Score?
If you have a 656 credit score, plenty of options are still available. Generally speaking, with this score, you can qualify for traditional loans and lines of credit. You can also enjoy favorable interest rates and terms. You will also be able to get approved for most credit cards, albeit with a higher interest rate than someone with an excellent score.
With this score, it may be more difficult to qualify for certain rewards programs and high-end credit cards, but it is still possible. You may need to look for a card that specifically caters to those with “fair” or “average” credit scores.
Tips That Can Help You Increase Your Creditworthiness
Now that you know where you stand, it’s time to take action. Here are a few things that you can do to boost your score:
Pay Your Bills on Time
Creditors take late payments very seriously, so it’s important to make sure you stay on top of them. Set up reminders and automatic payments if that helps.
Keep Balances Low
Are you carrying a balance on your credit card? Make sure to pay it down as much as possible every month.
Reduce the Number of Accounts
Do you have too many credit cards or lines of credit? Consider closing some of them to reduce your debt-to-credit ratio.
Check Your Credit Report Regularly
Stay on top of your credit report. If there are errors or discrepancies, try to solve them asap. If there are any, contact the credit bureaus and have them corrected.
Final Thoughts
You may not plan on changing jobs, making a significant purchase, or buying a home anytime soon, but having good credit is still important. It can help you open up doors and opportunities that weren’t available before. So, start making the necessary changes in how you manage your finances and watch your 656 score grow.
