If Your Credit Score Falls Below 700, Do These Things

If your FICO score drops, your interest rates and even insurance premiums could go up. Learn what to do if your credit score goes below 700.
A woman uses her laptop computer to check her credit score.
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By Geoff Williams
Updated on: August 31st, 2021

If you had a leaky boat in the middle of the ocean or a lake, you would quickly find the leak and patch it up before it got worse. If your credit score is above 700 and you see it drop below 700, even by a few points, it’s also important to find out why and fix it.

What to Know About Credit Scores

You may know what a credit score is, but it never hurts to have a little reminder. There are three major credit reporting agencies: TransUnion, Equifax, and Experian. They all calculate an individual’s credit score, and those three distinct credit scores often factor into whether a lender will give somebody a low interest rate or a high one.

But there are other companies that generate credit scores. VantageScore is one, and the Fair Isaac Corporation, a data analytics company, offers up the FICO Score. That’s based on the credit reports from the credit bureaus, and the FICO Score is often what many lenders will look to when deciding what your interest rate should be for personal loans, credit cards and certainly your mortgage.

Different sources will have slightly different reads on the situation, but according to Experian, a poor credit score is 300 to 579. A fair credit score is 580 to 669. If you have a good credit score, it’s 670 to 739. If you are in “very good” territory, your credit score is 740 to 799. An exceptional credit score is 800 to 850.

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Why It’s Important to Try and Keep or Raise Your Credit Score Over 700

Many lenders will lend money to people with a credit score of under 700. In fact, you may get some pretty good rates if your score is in the high 600s. After all, the high 600s is still consider a good credit score. But you’re going to be far better off if you can get your credit score above 700.

Why is that? Well, the lower credit score, the higher the interest rates you’re going to pay on loans.

The higher the interest rates you pay, the less money you have.

The less money you have, the less options in life you have. Suddenly instead of wondering what streaming service you’d like to add to your budget, you’re going to start asking yourself if you really need all of these streaming services.

So if your credit score does fall below 700, you’ll want to try the following strategies.

Strategies to Get Your Credit Score Above 700

  1. Analyze what happened.

This is important. You may know pretty quickly what went wrong. Maybe you recently missed a student loan payment — just completely forgot about it until you received a reminder, or maybe you didn’t get the reminder, or maybe you just couldn’t pay it for awhile. You eventually did, you got your finances back on track, and you’re confident that in a few months, as you no longer miss payments, your credit score will creep up.

Well, good. You’ve analyzed your situation, and it doesn’t look too terrible.

But maybe it’s something else? Maybe you have signed up for too many streaming services, and you also got a dog, and you don’t regret it, but the pet food and vet bills have been adding up. So you’re spending more money, and you’ve been borrowing more money and not paying it off every month, and maybe that’s affected your credit score.

The point is, if you have any hope of trying to raise your credit score, you need to have an idea of why it went down in the first place. Otherwise, it may just keep going down.

2. Establish better personal finance habits.

This is pretty self-explanatory, so we won’t go deep here. Bottom-line: If you’re paying everything on time, and you aren’t maxing out your credit cards, you probably are going to see your credit score climb.

3. Apply for more credit.

That may sound weird if your credit score has just dropped. But it may help your credit score, depending on a lot of factors. For instance, sometimes credit scores can sink because of the credit utilization ratio.

The credit utilization ratio is a formula that pits how much debt you have against how much credit you have. Lenders like to see that you’re borrowing no more than 30% of your available credit. If you borrow more than 30%, even if you pay it back every month, that can help bring down your credit score.

So if you analyze your situation and realize that you’re constantly borrowing far more than 30% of your available credit, you could apply for another credit card – or ask your creditors to give you more available credit – and that may actually help you with your credit score. That’s provided, of course, that you don’t just start borrowing more and wind up well over 30% of your credit score, once more. Then you may see your credit score drop even further away from 700.

4. Apply for your first credit card.

That is, if you don’t have a credit card, and your credit score has fallen under 700, you may want to rethink not having a credit card.

If you’ve had trouble with credit cards in the past, you may have decided to forgo the plastic. That’s an understandable decision, but ironically, not having a credit card can potentially hurt your bottom line if it means you’re paying more in interest rates on your other loans, like a home, car, or personal loan.

If you don’t have a credit card and you get one, if you pay it off every month, and you never borrow more than 30%, you may soon or eventually see your credit score above 700. Why? Because you’re demonstrating to lenders that you can borrow money every month – and pay it back. You’re showing them that you’re a good credit risk, and so up your credit score goes.

About the Author

Geoff Williams is a freelance journalist who has covered personal finance for several years. A former features reporter for The Cincinnati Post, Williams’ work has also appeared in numerous magazines including Consumer Reports, AARP Bulletin, and Ladies’ Home Journal. He is the author of “Living Well with Bad Credit” (HCI Books 2010).