Generally, credit scores range from 300 to 850. Anything above 700 is generally a good score. Even better, an excellent score lies between 800 and 850. However, most people’s credit scores usually lie between 600 to 750.
You’re right in the middle if you have a 686 credit score. It’s neither great nor bad; it could use some improvement, though. A 686 credit score puts you in the fair-to-good range of scores. So, what exactly does a 686 credit score mean? And why should you care?
What Are Credit Scores For?
This is a numerical representation of your ability to repay your debts. The higher the credit score, the better you look to creditors and lenders. Lenders use credit scores to decide how much money they’re willing to lend you and whether or not you should pay a higher interest rate.
Your credit score is determined by your record of utilizing credit, how punctual you are in making payments and the amount of debt that exists compared to what’s available. Equifax, Experian, and TransUnion – three major players in the industry – use these data points to assess your overall score.
A higher credit score increases your chance of getting approved for loans or credit cards. Plus, if you manage to get approved, you’re more likely to get better interest rates.
Other reasons why your score matters are as follows:
- It can impact your ability to find a new living space to rent.
- It can affect your ability to get a job or cause an employer to decide not to hire you.
- Insurance companies use it to determine your rate and coverage.
What Are Credit Scores Made Of?
The five basing factors of your credit score are:
Payment History (35%)
This is the most important factor and includes late payments, bankruptcies, collections, and other similar items.
Credit Utilization Ratio (30%)
This is the ratio of debt to available credit. It’s best to keep your ratio as low as possible.
Length of Credit History (15%)
This indicates how long your accounts have been open.
Types of Credit Used (10%)
This includes different types of credit, such as auto loans and credit cards.
Recent Applications for Credit (10%)
This is a record of applications recently made, including inquiries and new accounts opened.
What Your 658 Credit Score Means
Having a 686 credit score usually means that you have some late payments or unpaid debts in your history. You may also have a combination of positive and negative items on your credit report.
A 686 credit score isn’t going to knock the socks off potential lenders. It tells them that you are a medium-risk borrower. While some lenders might think you’re a good bet for a loan, others might be wary of extending your credit.
Also, lenders and landlords that check your credit score will see that you have a fair-to-good credit profile. That means they’ll be more likely to take a chance and extend you credit or let you rent the property.
Tips to Maintain/Boost Your 686 Credit Score
Although a 686 credit score is considered fair-to-good, it’s still possible to improve it. Here are some tips to get started:
Invest in On-time Payments
This should be your number one priority in maintaining a good credit score. Paying your bills on time not only shows creditors that you’re reliable but also helps to improve your score over time. So, make sure to pay all your bills fully and on time when possible.
One way to stay on top of payments is to set up automatic bill pay. This ensures you pay your bills each month.
Reduce Credit Utilization Ratio
This refers to the ratio of debt to available credit that you have. Aim to use less than 30% of your credit limit. Doing so will make creditors see that you’re not maxing out your cards and are not having difficulty paying back debts.
You can also open up new lines of credit if you need more available credit, but don’t go overboard. Too many inquiries on your report can hurt your score.
Monitor Your Credit Report Regularly
Regular checking of your credit report can help in spotting any inaccuracies or suspicious activity. You can then report them to the credit bureaus. You can also dispute any errors on your report that negatively affect your score.
Diversify Your Credit
If most of your credit comes from one source, such as student loans or a single credit card, diversify it. Try to get different types of credit, such as auto loans, mortgages or retail cards. This will help demonstrate to lenders that you can manage different types of credit responsibly.
Build a Solid Credit History
If you don’t have a credit history, it’s time to build one. Pay your dues in full and on time. Keep your accounts open for a long time. Over time, this will help to improve your credit score significantly.
Final Thoughts
A 686 credit score is not perfect, but it’s still considered fair-to-good. You can enjoy some perks from this score, such as applying for loans and renting properties. If you’re after a better score, make sure to pay your bills on time, reduce your credit utilization ratio, diversify your credit and monitor your credit report. You can boost your 686 credit score with little effort and make it even better!
