70% of people in America claim that taking out a loan has improved their quality of life. This might involve taking out a personal loan to support a new business or getting a mortgage to buy a home. These loans can make managing the cost of expensive purchases much more manageable in your daily life.
However, it isn’t always easy to get your hands on a loan. Most lenders will want to see a good credit history before they approve your loan. This is where your credit score comes into play.
So is 630 a good credit score or not? If you are looking for a loan it is important to understand how your credit score will affect your borrowing power. In that case, you’re in the right place — read on to find out everything you need to know about the importance of credit scores now!
What Is Your Credit Score?
If you are an adult in America with financial responsibilities you will almost certainly have a credit score. This is a number that reflects how well you have managed your financial commitments over the years.
This might start when you sign up for a utility bill, such as a phone contract, or open your first bank account.
However, 40% of Americans don’t know what their credit score is! Fortunately, it is quick, easy, and (importantly) free to find out your credit score. You can do this using websites such as Experian or the Annual Credit Report.
How Do Lenders Calculate Your Credit Score?
Generally, credit scores range from 300 to 850. A credit score website or credit company can calculate your credit score based on your credit report.
This is a record of your financial interactions, which is constantly updating. In particular, this report shows how well you manage your ongoing financial responsibilities. Because of this, your credit score can fluctuate over time — dipping or rising depending on how well you manage your finances.
Because of this, several things can affect your credit score. This includes:
- How well you manage your financial commitments (for example, how often you pay your bills on time)
- Your credit card utilization ratio
- How long you have had a good, stable credit score for
- Whether your credit score has fluctuated drastically
- The type of bank accounts, loans, and debts you already have
A lot of people in America have more than one bank account to help them with financial planning. This can also give you access to a range of perks at different banks.
However, it is important that you do not open several bank accounts in one go. This could result in your credit score dropping suddenly.
Why Is Your Credit Score Important?
If you are looking for a loan, your bank or lender will always want to take a look at your credit score. This gives them an idea of how well you will be able to manage loan repayments. So it can help them decide whether or not it is a good idea to lend you money.
Because of this, your credit score can have a big impact on your borrowing power if you do want to take out a loan.
This can affect how much a lender will let you borrow. For example, people with great score scores have a history of managing their financial commitments. So lenders will feel confident about them making larger loan repayments over the loan period.
In comparison, people with lower credit scores will struggle to borrow as much in one go. This is why around 7 million adults in America currently have to use alternative financing when they buy a home.
Your credit score will also affect the terms of your loan. Most banks, for example, charge higher interest rates or offer longer loan repayment periods to people with low credit scores.
This means that, in the long run, a loan will be more expensive for someone with a poor credit score.
Is 630 a Good Credit Score?
Finding out your credit score is one thing but what does this number mean? Well, most lenders categorize credit scores like this:
- 800-850 is an exceptional credit score
- 740-799 is a very good credit score
- 670-739 is a good credit score
- 600-669 is a fair credit score
- 300-599 is a poor credit score
While most lenders consider 630 a fair credit score, it could still affect your borrowing power. So you may find it harder to borrow large amounts or get charged higher mortgage interest rates, for example.
That said, you are not alone if your credit score is on the lower side. In fact, 30% of Americans have a credit score of 600 or less.
Fortunately, you can do a lot to improve your credit score. This usually takes at least a few months so it is a good idea to start working on your credit score before you apply for a loan.
Let’s take a look at how to build credit and improve your borrowing power.
Get On Top of Your Financial Planning
When it comes to improving your financial position in any way, the first thing you should do is review your financial planning. This helps you stay on top of your financial commitments in the long run.
For example, you should look at your overall financial situation. This includes collecting information about your:
- Current bank accounts
- Any debt you have
- Any loans (and loan repayments) that you have
- Your essential outgoings
- Your income
- Your spending
You can use this to draw up an accurate monthly budget. This will help you figure out how much disposable income you have each month after covering your bills and rent, for example. So you will find it easier to stay on top of your bills and loan repayments.
This can also make it easier to set long-term financial goals. Start by saving to clear your existing debt, for example.
Then you can start setting money aside for a house deposit or another large purchase. This will also improve your borrowing power when it comes to getting a loan.
Pay Your Bills on Time
Every time you pay a bill on time this is recorded in your credit report. So this is a simple and great way to improve your credit score. This can boost your score within a matter of months!
This includes:
- Paying your utility bills
- Paying your rent
- Making mortgage repayments
- Making loan repayments
- Paying your credit card bills
This is why it is important to create a realistic budget based on your fixed income each month. This will help you set aside money to make sure that you can always pay your bills on time.
Keep Your Credit Card Utilization Ratio in Check
Millions of people across America use credit cards. These can be a useful way of making big-ticket purchases more manageable. However, you should be careful about how you use your credit card each month.
Your credit card comes with a maximum credit limit but reaching this limit each month could seriously damage your credit score. In fact, regularly using more than 50% of your limit without paying it off could also impact your score.
Because of this, you should aim to keep your credit usage at 30% at most. Keeping it below 10% will help you maintain a good credit score.
Consider Getting a Secured Credit Card
While you have to be careful about how you use credit cards, these can help you improve your credit. This is because paying off your credit card bill on time each month will go on your credit record.
Of course, you should only use a credit card within your means. Otherwise, you could damage your credit score further. Again, this is where using a budget can help.
If you have a lower credit score you may struggle to get approval for your card. This is where a secured card can come in handy.
A secure credit card works in the same way as a standard credit card. However, before getting approved, you will have to pay a cash deposit to the bank. This acts as collateral if you cannot pay your credit card bill.
Look for Other Ways to Build Your Credit Score
Getting a credit card isn’t your only way of building good credit. As we’ve already mentioned, paying your utility bills on time can help with this.
Because of this, it can help to take out bills in your name to start building your credit report.
For example, if you live with friends or a partner, make sure at least one of the household bills is in your name. This won’t add heaps of financial responsibility to your plate. But it does means that you get the additional benefits of paying your bills on time!
It is a good idea to keep a record of which bills are in your name. That way you know which accounts to cancel or switch when you move home.
Get Support From a Credit Repair Expert
A lot of people in America feel intimidated or overwhelmed when it comes to financial planning. This may be why 1 in 3 Americans don’t use a budget.
However, when it comes to managing your credit score, you are not alone! It can help to get support from an experienced credit coach.
These financial counselors have specialist knowledge about ways to improve your credit score. They will be able to take a look at your specific financial circumstances and advise you on ways to boost your credit. They’ll also highlight areas of your financial planning that could be damaging your credit.
On top of this, a credit coach has expert knowledge of the resources available to you. For example, they can make you aware of financial support schemes and of the best-secured credit card providers.
With their support, you will be able to make informed and empowered decisions about your financial future. So when you’re ready to take out a loan, you will have everything in place!
How Can Jeanne Kelly Help You Improve Your Credit Score?
Years ago Jeanne Kelly found herself in a financially precarious situation, with a poor credit score. She spent years working on her credit repair and collecting a wealth of useful information on how to do this.
Now, as an experienced credit coach, she wants to share this information with you to help you improve your credit score as well!
Jeanne has published two books on how to improve your credit score – The 90-Day Credit Challenge and The Credit Makeover. She has also been interviewed on the Today Show and in various publications, including the New York Times and the Huffington Post. Recognized credit platforms, such as Experian and Credit.com, also feature her expertise.
While you can access support using either of Jeanne’s books, she runs specialist coaching classes online as well. These provide an in-depth understanding of credit and help you create a plan for improving yours. And you can do this all from the comfort of your own home!
Or, if you would like even more specific support, you can now hire Jeanne as your private credit coach. She will work with you over an extended period to help you achieve your credit goals.
Start Building Credit Today
Now you know the answer to the question “Is 630 a good credit score?” you can use this information to start organizing your finances for the future.
While this might not be the worst credit score you can have, it doesn’t put you in the strongest situation for taking out a loan. Fortunately, there are plenty of things you can do to improve your credit score and boost your borrowing power.
You don’t have to do this alone either. Get in touch today to find out more about Jeanne Kelly’s credit coaching classes. You’ll be able to start improving your credit score in no time!
