Is 696 a Good Credit Score & How to Improve It

A credit score serves as a numerical representation of creditworthiness, offering lenders a quick assessment of financial reliability. This three-digit number synthesizes information from a consumer’s credit report, reflecting their history of managing debt and making payments. Understanding a credit score is fundamental to personal finance, playing a significant role in financial decisions. It provides a snapshot of how responsibly an individual has handled credit obligations in the past.

Understanding Credit Score Ranges

Credit scores are evaluated using models like FICO and VantageScore, which typically range from 300 to 850. A score of 696 is considered “good” within these models. FICO classifies “good” credit as 670-739, while VantageScore considers 661-780 as “good” or “prime.” This places a 696 score in a favorable category, indicating low risk to lenders.

A 696 credit score is viewed positively, but it sits at the lower end of FICO’s “good” spectrum, where “very good” starts at 740 and “exceptional” at 800. While approval for financial products is likely, the lowest interest rates or most competitive terms are often reserved for those with higher scores. Improving a score even slightly can open doors to better offers. The average FICO Score in the U.S. was 715 (Q3 2023), and the average VantageScore was 702 (March 2024), both in the good range.

What a Credit Score Influences

A credit score impacts a consumer’s financial life, affecting access to products and their terms. A 696 score, categorized as “good,” positions individuals favorably, though terms may differ from those with higher scores. For loan approvals, a higher score can lead to lower interest rates and more favorable terms for mortgages, auto loans, and personal loans. While a 696 score allows approval for conventional mortgages, which often require a minimum of 620, the lowest advertised rates are typically for scores of 740 or higher.

For auto loans, a good credit score results in better rates; those in the 700-749 range may receive rates around 7%, versus over 15% for lower scores. Credit card offers are influenced; a 696 score qualifies individuals for standard, unsecured credit cards, though not always premium cards with the best rewards or introductory offers. Landlords check credit scores for rental applications; a score of 670 or above is considered good, leading to higher approval chances and lower security deposits.

Credit scores influence insurance premiums, as insurers use credit-based scores to assess risk, with higher scores often translating to lower rates. Utility companies may consider credit history when determining if a deposit is required for new service. Some employers review credit history as part of background checks for certain positions, particularly those involving financial responsibility.

Factors Determining a Credit Score

Credit scoring models consider several components when calculating a credit score, each with a different weight. Payment history is the most influential factor, accounting for about 35% of a FICO Score. Consistently making on-time payments across all credit accounts demonstrates reliability and positively contributes to a score. Conversely, late payments, defaults, or collections can significantly reduce a score.

Credit utilization (amount owed) is another factor, making up about 30% of a FICO Score. This is the proportion of available credit currently used. Keeping credit utilization low, ideally below 30% of total available credit, is recommended, with lower percentages (e.g., under 10%) often correlating with higher scores. Length of credit history accounts for about 15% of a FICO Score, considering the age of oldest and newest accounts, and the average age of all accounts. A longer history of responsible credit management is viewed favorably.

New credit (recent applications and newly opened accounts) constitutes about 10% of a FICO Score. Opening multiple new accounts in a short period can indicate increased risk and may temporarily lower a score due to hard inquiries. The credit mix (variety of account types like installment loans or revolving credit) contributes about 10% to a FICO Score. Demonstrating the ability to manage different types of credit responsibly can be beneficial.

Strategies for Improving Your Credit Score

Improving a credit score from 696, or maintaining a strong credit profile, involves consistent financial habits. The most impactful action is paying bills on time, as payment history is the largest determinant of a credit score. Setting up automatic payments or reminders can help ensure that no due dates are missed.

Maintaining low credit utilization is another strategy. Experts advise keeping credit utilization below 30% of total available credit; under 10% can further benefit a score. This can be achieved by paying down balances regularly and avoiding maxing out credit cards. While a 696 score indicates responsible credit use, avoiding too many new accounts at once can prevent multiple hard inquiries from temporarily lowering the score. Each hard inquiry can slightly reduce a score for a short period.

Maintaining a long credit history is beneficial; avoid closing old, paid-off accounts, as this can shorten the average age of accounts and reduce available credit, impacting utilization. Monitoring credit reports regularly helps identify and dispute errors that could negatively affect a score. Federal law entitles consumers to a free annual credit report from each of the three major nationwide credit bureaus, with free weekly access permanently extended at AnnualCreditReport.com. While diversifying a credit mix can be helpful, only take on new debt, such as an installment loan, if it aligns with genuine financial needs and can be managed responsibly.