How to Move Up the Credit Score Ranges and Improve Your Financial Health

Credit scores are a critical factor in determining your financial health. Whether you’re applying for a mortgage, car loan, or credit card, your credit score will play a major role in deciding whether you’re approved and what interest rates you’re offered. Credit scores not only affect your ability to borrow money but also influence other financial aspects of life, such as insurance premiums and even employment opportunities. Understanding the different credit score ranges and knowing how to move up within them can significantly enhance your financial well-being.

In this comprehensive guide, we will break down credit score ranges, explain what a 651 credit score means, and provide actionable strategies to improve your credit score, ultimately boosting your financial health.

Understanding Credit Score Ranges

Credit scores generally range from 300 to 850, with higher scores indicating better creditworthiness. These scores are calculated by credit bureaus—mainly Experian, Equifax, and TransUnion—based on your credit history, including payment patterns, credit utilization, length of credit history, and other factors.

Here’s a breakdown of the different credit score ranges and what they mean:

• 300-579: Poor Credit
  A score in this range suggests that you have a poor credit history, possibly due to missed payments, defaults, or high credit utilization. Lenders are likely to see you as a high-risk borrower, making it hard to get approved for credit or loans. If approved, you’ll likely face very high-interest rates.
• 580-669: Fair Credit
  Individuals with a fair credit score fall into the higher-risk category, but it’s still possible to get approved for loans or credit cards. However, the interest rates and terms you’ll be offered will likely not be favorable.
• 670-739: Good Credit
  A score in this range indicates a responsible credit history with a good chance of getting approved for most loans or credit cards. Interest rates offered to those in this bracket are typically lower than for those with fair or poor credit scores.
• 740-799: Very Good Credit
  This is an excellent score, indicating strong credit management. With this score, you’re more likely to be approved for loans, and you’ll usually qualify for lower interest rates and better loan terms.
• 800-850: Exceptional Credit
  The pinnacle of credit health, a score in this range demonstrates that you are an extremely low-risk borrower. Those with an exceptional score get the best interest rates, terms, and loan options.

What Does a 651 Credit Score Mean?

A 651 credit score falls within the “fair” category, which means that while it’s not terrible, there is room for improvement. A 651 score is high enough to qualify for some types of credit, but you may face higher interest rates and stricter loan terms. Many individuals with a 651 credit score can still get approved for certain types of credit cards and auto loans, but they might not qualify for premium credit products with lower interest rates.

For anyone with a 651 credit score, the goal should be to move into the “good” credit range (670-739), as this can open up more financial opportunities and better interest rates. Now, let’s explore how to improve a 651 credit score and move up the credit score ranges.

How to Improve Your Credit Score

1. Pay Bills on Time

The most important factor in determining your credit score is your payment history, which accounts for 35% of your score. Late payments, even just a few days behind, can severely damage your credit score. One of the easiest ways to ensure you don’t miss payments is to set up automatic payments or reminders.

• Tip: If you have missed payments in the past, start paying all your bills on time from now on. Over time, consistent on-time payments will improve your score.

2. Reduce Your Credit Utilization Ratio

Your credit utilization ratio, or how much credit you’re using compared to your credit limit, is the second most significant factor affecting your credit score. A high credit utilization ratio (above 30%) can lower your credit score. For instance, if you have a credit card limit of $10,000 and you’re using $5,000, your credit utilization ratio is 50%.

• Tip: Aim to keep your credit utilization below 30%, and ideally around 10%. If possible, pay down existing credit card balances to lower your utilization ratio. You can also request a credit limit increase from your credit card issuer to reduce the ratio without paying down debt.

3. Don’t Close Old Credit Accounts

The length of your credit history accounts for 15% of your credit score. Keeping old accounts open, even if you’re not using them, can help improve your score. This is because longer credit histories show that you’ve been responsible with credit over time.

• Tip: If you don’t have any pressing need to close an account, keep it open, especially if it’s one of your oldest lines of credit.

4. Diversify Your Credit Mix

Having a variety of credit types (credit cards, mortgage, auto loans, etc.) can help your credit score. A well-rounded credit portfolio shows that you can manage different types of credit responsibly.

• Tip: If you only have one type of credit, consider adding a different kind (like a small installment loan) to improve your credit mix. However, don’t take out a loan you don’t need just to improve your credit score.

5. Limit Hard Inquiries

When you apply for new credit, a hard inquiry is placed on your credit report, and too many hard inquiries can negatively affect your score. This happens because applying for too much credit in a short period can make you look financially desperate or overextended.

• Tip: Try to space out credit applications and avoid applying for new credit unless you really need it.

6. Review Your Credit Report Regularly

Mistakes can happen, and sometimes incorrect information appears on your credit report, which can hurt your score. Regularly checking your credit report can help you identify and correct any errors.

• Tip: You’re entitled to a free credit report from each of the major credit bureaus (Experian, Equifax, and TransUnion) once a year. Take advantage of this and review your reports to make sure all the information is accurate.

7. Settle Outstanding Debts

Outstanding debts, particularly those in collections, can have a devastating impact on your credit score. If you have any debts that are past due or in collections, try to settle them as soon as possible.

• Tip: Contact your creditors to negotiate a payment plan or settlement if you can’t pay the full amount. Once settled, the negative impact on your credit will begin to lessen over time.

8. Become an Authorized User

If you have a trusted friend or family member with a good credit history, becoming an authorized user on their credit card can help improve your credit score. The positive payment history from that account will reflect on your credit report, helping to boost your score.

• Tip: Make sure the primary cardholder has a strong payment history before becoming an authorized user. You’ll want to benefit from their good credit habits.

9. Use Credit-Building Tools

There are various tools and services designed to help people build or repair their credit. For example, some companies offer “credit builder” loans that allow you to borrow a small amount and repay it, improving your credit score in the process.

• Tip: Research credit-building services or consider getting a secured credit card, which can be a stepping stone for improving your credit score if used responsibly.

How Long Does It Take to Improve a Credit Score?

Improving your credit score doesn’t happen overnight, but by following the tips outlined above, you can start to see results within a few months. The amount of time it takes to improve your score depends on various factors, including your current credit situation, the severity of any negative marks on your credit report, and how consistently you apply credit-building practices.

If you have a 651 credit score, moving into the “good” credit range can take anywhere from six months to a year of responsible credit behavior. If you’re starting with a score in the lower ranges, it might take longer, but the key is consistency and patience.

Benefits of Improving Your Credit Score

Once you move up within the credit score ranges, you’ll start to notice significant benefits:

• Better Interest Rates: One of the most obvious advantages of a higher credit score is lower interest rates on loans and credit cards. Over time, these savings can add up to thousands of dollars.
• More Loan Options: With a higher credit score, you’ll have more options when applying for credit. You’ll be able to choose from better credit cards and loans with more favorable terms.
• Improved Financial Health: A good credit score is often a sign of financial stability and responsibility, which can give you peace of mind when managing your finances.
• Access to Better Rewards and Perks: Some credit cards with higher requirements offer more valuable rewards, such as cashback, travel points, and sign-up bonuses.

Final Thoughts

Credit scores play a crucial role in your financial health, and knowing where you fall within the credit score ranges can help you plan how to improve your financial standing. For those with a 651 credit score, the good news is that you’re not far from the “good” credit range, and with some targeted efforts, you can quickly improve your score and enjoy the benefits of better loan terms and financial stability.

By paying bills on time, lowering your credit utilization, maintaining old credit lines, and using a variety of credit products responsibly, you’ll be well on your way to moving up the credit score ranges and achieving a better financial future.