645 Credit Score: Is It Good, Bad, or Average?

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Picture this: You're sitting at your kitchen table, sipping on your morning coffee, when suddenly you're hit with a bolt of curiosity.

You think to yourself, "I wonder what my credit score is?"

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So, you grab your laptop, type in a few keystrokes, and there it is: 645.

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But what does that number even mean? 🤔

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Welcome to the perplexing world of credit scores – where three little digits hold the key to your financial future.

Understanding what makes a credit score "good" is like deciphering a secret code that unlocks doors to better interest rates, higher credit limits, and smoother financial sailing.

Fear not, though, dear reader, for I'm here to be your guide through this maze of credit conundrums.

In this article, we'll unravel the mysteries of credit scores, explore what it takes to achieve a "good" score, and arm you with practical strategies for boosting your credit health.

So, grab another cup of coffee, and let's dive into the world of credit scores together.

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What’s a Good Credit Score?

What's a Credit Score?

You know those three little digits that seem to follow you everywhere in the world of finance?

That's your credit score.

I like to think of it as a GPA for your financial behavior, reflecting how responsible you are with borrowed money.

How good is your financial GPA? 👀💸

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Lenders, landlords, and even some potential employers use it to gauge your trustworthiness.

In other words, it's kind of a big deal.

Understanding Credit Score Ranges

Credit scores typically range from 300 to 850, with higher scores indicating better creditworthiness.

Here's the breakdown 👇🏾:

Poor (300-579): You might encounter difficulties getting approved for credit or loans with a score in this range. If you do get approved, expect higher interest rates and less favorable terms.
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Fair (580-669): While you may qualify for credit, you're still considered a higher risk to lenders. You might encounter higher interest rates and lower credit limits.
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Good (670-739): Congratulations, you're in the sweet spot! A good credit score opens doors to better interest rates, higher credit limits, and more favorable loan terms.
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Very Good (740-799): With a score in this range, you're seen as a low-risk borrower. You'll likely qualify for the best interest rates and terms available.
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Excellent (800-850): You're the cream of the crop. An excellent credit score means you're practically a financial superhero, with access to the best rates and terms on the market.

How Credit Scores Are Calculated

Ever wondered how those three little digits are determined? Let's break it down.

Your credit score, often calculated using a model called FICO, is a result of a complex algorithm analyzing various factors from your credit report.

Here's what goes into calculating FICO scores:

(Source: myFICO)

Payment History: This is the biggie, accounting for a whopping 35% of your score. It looks at whether you pay your bills on time, how often you've been late, and how overdue you were. Hint: Timely payments are your best friend.
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Amounts Owed: Making up 30% of your score, this factor measures how much of your available credit you're using. Keep your credit utilization low – ideally below 30% – to show you're financially savvy and not maxed out.
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Length of Credit History: Accounting for 15%, this one looks at how long you've had credit accounts open. A longer credit history is like a gold star, showing you're experienced at managing credit. But if you're just starting, don't fret; you'll build it up over time.
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Credit Mix: This contributes 10% and considers the types of credit accounts you have, like credit cards, loans, and mortgages. A diverse mix shows you can handle different kinds of debt. Just don't go opening accounts willy-nilly – only if you need them.
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New Credit: Wrapping up the list at 10%, this factor looks at how many new accounts you've opened recently. Too many, too fast can ring alarm bells to lenders. Pace yourself and apply for credit only when necessary.

For more tips on building and improving your credit, check out our blog post "Winning the Credit Game: A Beginner's Guide."

Understanding these factors can help you take control of your credit journey and pave the way for a brighter financial future.

Is 645 a Good Credit Score?

Now, let's address the burning question on your mind: Is 645 a good credit score?

Well, it falls into the "fair" range, which means there's room for improvement.

While it's not bad per se, it might limit your access to certain financial products and could result in higher interest rates.

Keep in mind that the average credit score across the United States is 717.

So, while 645 isn't far off, the national average can serve as a helpful benchmark to aspire to.

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Aim to inch closer to – or even surpass – this average to strengthen your financial footing.

But the good news is that armed with the right knowledge and strategies, you can work towards improving your score and unlocking a world of financial opportunities.

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Levels to Credit Scores

Advantages of a Good Credit Score

Wondering why having a good credit score (being in the credit range of 670 and up) is such a big deal?

Let's break it down 💳:

Access to Better Financial Products: Good credit opens doors to premium credit cards, lower interest rates on loans, and favorable terms on mortgages and auto loans.
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Easier Approval: Good credit makes it easier to get approved for credit cards, loans, and rental agreements, as lenders and landlords see you as a trustworthy borrower.
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Negotiating Power: A good credit score gives you leverage to negotiate better terms with lenders, potentially saving you even more money.
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Lower Insurance Premiums: Some insurance companies offer lower premiums to those with good credit, saving you money on auto and homeowners insurance.
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Reduced Security Deposits: Landlords and utility companies may waive or reduce security deposits for those with good credit, saving you upfront costs.

Having a good credit score isn't just about numbers – it's about opening up opportunities and saving money in the long run.

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Financial Products and Terms

Your credit score isn't just a number on a screen – it's a ticket to better financial opportunities. Here's how your credit score affects the terms and conditions of various financial products:

Lower Interest Rates: A higher credit score means you're less of a risk to lenders, so they'll offer you lower interest rates on loans and credit cards.
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Higher Credit Limits: Lenders are more willing to extend higher credit limits to borrowers with good or excellent credit scores, giving you more purchasing power.
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Favorable Loan Terms: With a good or excellent credit score, you'll enjoy better loan terms, such as longer repayment periods and lower fees.

Implications of Lower Credit Scores

On the flip side, lower credit scores can limit your financial options and come with some drawbacks:

Higher Interest Rates: Lenders and financial institutions see borrowers with lower credit scores as riskier, so they'll charge higher rates to compensate for the increased risk.
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Limited Access to Credit: With a lower credit score, you may have trouble qualifying for certain financial products, such as credit cards or loans, or you may only qualify for them with less favorable terms.
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Difficulty Renting or Buying: Landlords and mortgage lenders often check credit scores as part of the application process, so a low credit score could make it harder to rent an apartment or get a new loan to buy a home.

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How Can I Improve My Credit Score?

Practical Tips for Improving Your Credit Score

Improving your credit score doesn't have to feel like rocket science. With a few simple strategies and a sprinkle of discipline, you can start seeing positive changes in no time. Here are some practical tips to help you on your credit-boosting journey:

Pay Bills on Time: One of the most crucial factors in your credit score is your payment history. Make sure to pay all your bills – including credit card bills, loan payments, and utility bills – on time, every time.
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Reduce Credit Card Balances: Your credit utilization ratio – the amount of credit you're using compared to your total available credit – plays a significant role in your credit score. Aim to keep your credit card balances low, ideally below 30% of your credit limit.
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Monitor Credit Reports: Regularly review your credit reports from the major credit bureaus – Equifax, Experian, and TransUnion – to check for any errors or inaccuracies. Dispute any discrepancies you find to ensure your credit report is accurate.

Importance of Financial Habits

Your credit score reflects your financial habits, so adopting healthy practices can lead to an improvement in your score over time. Here's why certain habits matter:

Paying Bills on Time: On-time payments are a great way to demonstrate reliability and responsibility to lenders, boosting your credit score.
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Reducing Credit Card Balances: Lowering your credit card balances reduces your credit utilization ratio, which can lead to an increase in your credit score.
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Monitoring Credit Reports: Checking your credit reports regularly allows you to catch and correct any errors that could be dragging down your score.

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Resources for Credit Management

Managing your credit health effectively requires access to the right tools and resources. Here are some resources that can help you stay on top of your credit:

Credit Monitoring Services: Consider signing up for a credit monitoring service that provides regular updates on your credit score and alerts you to any changes or suspicious activity.
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Financial Apps: There are many apps available that can help you track your spending, set financial goals, and monitor your credit health. Look for apps that offer features like budgeting tools and credit score tracking.
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Educational Materials: Take advantage of online resources, articles, and guides that offer tips and advice on improving and managing your credit score. Websites like MyFICO and Credit Karma provide valuable insights and educational content on credit management.

By implementing these practical tips and utilizing available resources, you can take control of your credit health and work towards achieving a better credit score. Remember, improving your credit score is a journey, not a sprint – so stay patient and consistent, and you'll see results over time.

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How I Improved My Credit Score by 100+ Points

Curious about how I managed to boost my credit score by over 100 points? Here's the inside scoop on my journey to credit score success:

Taking My Time: Rome wasn't built in a day, and neither was my credit score improvement. I wasn't in a rush to make significant investments upfront; instead, I took it slow and steady.
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Being the Ideal Credit Card Holder: I became the poster child for responsible credit card usage. That meant paying my bills in full and on time, every single month.
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Understanding Due Dates vs. Statement Dates: Through trial and error, I learned the critical difference between these two dates – and it made all the difference.
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- Due Date: This is the date by which you need to make at least the minimum payment on your credit card bill to avoid late fees and penalties. It's typically a few weeks after your statement date.
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- Statement Date: This is the date when your credit card issuer generates your monthly statement, detailing your transactions, balances, and minimum payment due for that billing cycle. It usually occurs about a week before your due date.
  So, in simple terms, your statement date is when your credit card company creates your bill, while your due date is when you need to pay that bill.

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In my case, I made sure to pay my entire credit card bill by the due date to avoid late fees.

But I also learned that keeping my credit card utilization extremely low when my statement date rolled around was key. 🔑

By showing that I was using my credit card responsibly and keeping my credit utilization rate well below 30% – sometimes even under 20% – I was able to see the best results in improving my credit score.

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Keeping Utilization Low: I made sure to keep my credit card utilization extremely low when my statement date rolled around, aiming to stay below that magic 30% threshold.
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Maximizing Available Credit: I discovered the power of maximizing my available lines of credit across all my cards, strategically using only a fraction of my total credit limit to keep my utilization rate impressively low.
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Demonstrating Low Need for Credit: By keeping my utilization low and not maxing out my available credit, I sent a positive signal to the credit main credit bureaus that I didn't rely heavily on credit.
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Managing Student Loans: Even with student loans on my record, I was able to achieve significant credit score growth. Having other types of credit didn't hinder my progress.
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Slow and Steady Wins the Race: While the process was slow, the results were worth it. Understanding credit cards inside and out paid off in the long run, and I'd recommend this approach to anyone willing to invest the time and effort.

So, if you're looking to boost your credit score, take a page from my playbook and approach it with patience, diligence, and a deep understanding of how credit works.

Trust me – it's worth it in the end.

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Resources

It Starts With Your Money Mindset

Looking to take your financial journey to the next level?

Check out my Money Mindset blog post and workbook! 📖

Dive into practical tips and exercises designed to improve your money mindset and empower you to make confident financial decisions.

Whether you're aiming to boost your credit score or master budgeting, these resources will be your trusty companions on the path to financial success.

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Improve Your Money Mindset in 11 Simple Steps

Transform your relationship with money and pave the way for financial success with these actionable steps!

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Time to Reflect

As we wrap up our journey through the world of credit scores, let's take a moment to recap what we've learned and reflect on our next steps:

Understanding Credit Scores: Your credit score isn't just a number – it's a reflection of your financial habits and behavior.
Knowing where you stand and how to improve is key to unlocking financial opportunities.
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Strategies for Improvement: Whether it's paying bills on time, reducing credit card balances, or monitoring your credit reports, small changes can lead to big improvements in your credit score.
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Taking Control: Remember, your credit journey is in your hands.

By staying informed, making smart financial decisions, and taking proactive steps to improve your credit health, you can pave the way toward a brighter financial future.