If you’ve had the good fortune of watching your credit score go up 10 or 20 points recently, you deserve a congrats.
But, what can you do with a good credit score? That’s a question all of us should be asking when we see a double-digit rise in our score.
Answering that question can send you down a rabbit hole of Google searches, Reddit threads and an endless buffet of personal finance blogs.
We’re going to save you the time and give you eight tips for what you should do when your credit scores go up.
1. Keep the Momentum of Your Higher Credit Scores Going
You’ve made it this far, right? Maybe the July 2017 credit scoring changes bumped up your scores enough to move you from bad credit to fair credit, or maybe from good credit to very good credit.
Whichever the change, there’s always more you can do. The gold standard of credit scores is anything at 800 or above. According to Experian, 20% of the population has FICO scores at or above 800. Here’s a quick list of the credit scoring tiers:
- 800+: Excellent
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 579 and below: Poor
The way that these credit tiers are organized provides the perfect environment to set goals for increasing your credit scores. Are you in the Very Good tier? Then set a goal to move up into Excellent.
In order to raise your credit scores, you need to set good habits in place. Here are a few tips we’ve dug up through research and interviews with experts:
- Never let a credit card balance go above 30% of the card’s credit limit
- Never let a bill go 30 days past due or more
- Check your credit scores and history once a week
- Set all credit card, loan and mortgage payments to AutoPay
Doing these four things will ensure that you never pay late and that your credit card utilization (balance vs. limit) is always low, two factors that have the most influence on your credit scores.
Checking your credit scores weekly will alert you to any incorrect or fraudulent information.
2. Compare Yourself to the Average Credit Card User
Based on our research of credit card data from sources like Experian, Credit Card Forum and Value Penguin, we’ve discovered that the average credit score of the American consumer hovers in the 690’s and the average debt of someone who carries a balance is around $26,000 across the three credit cards they own.
Take a second to think about how your overall credit balances and your credit scores compare to the national average. Are your scores lower or higher? Is your debt lower or higher? How many credit cards do you have?
It’s easy to get caught up in how high your scores are but this isn’t an excuse for a little self-evaluation. Comparing yourself to the national averages will give you a sense of where you really stand. Maybe you’ve got more credit debt than the average American. If you do, that needs to change. If you’ve got less debt than average, keep it that way.
Credit scores are a lifelong journey. They don’t magically go up hundreds of points overnight without deliberate and beneficial habits, despite what some YouTube videos or blog posts might say. The credit scoring system rewards consistency and discipline.
Don’t take for granted the fact that your scores went up. Keep your head down, work hard to raise your scores even further and don’t let yourself slip into bad habits.
3. Call Your Credit Card Company & Ask Them to Lower Your Interest Rate
We asked a few experts what they thought consumers should do when credit scores go up. Calling your credit card company for better rates was the most popular answer.
You see, when a credit card company gets your application, they determine what your interest rate will be based on your credit scores.
Your credit scores tell them how much of a risk you are. So, lower scores mean you’re a greater risk.
To offset that risk, credit card companies will charge you a higher interest rate with the hope that you’ll carry a balance and the higher interest rate will earn the company more money.
Now that your credit scores have gone up, your risk, in theory, has gone down. Use that to your advantage, says Lauren Freeman of PDL Help, a company dedicated to getting people out of high-interest payday loans.
“With a high credit score and a history of good payments, consumers can get their interest rates significantly reduced,” Freeman said. “This type of phone call shouldn’t take more than 10-15 minutes and you'll see instant results.”
4. Shop Around for a New Car Insurance Company
Auto insurance is one product whose price is influenced by credit scores. While your scores aren’t the only factor taken into account when determining premiums, they do play an important role. Why?
Well, statistics show that people with lower credit scores are more likely to make a claim. Claims cost the insurance company money, so they recoup this by either raising your rates after an accident or starting out with higher premiums because of your scores.
HighYa Senior Editor Derek Lakin pointed out that car insurance companies typically run your credit score every two years. If your score has gone up in double-digit amounts, call your insurance company and let them know.
Also, leverage your higher scores by shopping around with new companies. Not only will your lower scores get you better quotes, but, in some cases, insurance companies will offer better (or worse) rates than they did the year before.
Shopping around for new rates to match your new credit scores could save you around $360 a year, Lakin wrote.
5. Refinance Your Auto Loan
Think back to when you first got any auto loans that you have right now. What were your credit scores?
Now that your scores have gone up, it might be time to look for an auto loan refinance. This is something you can do with your current lender and you can also shop around to banks and credit unions to find good rates.
Refinancing is a relatively straightforward process. You’re getting a new loan on your car, but since your interest rates will be lower thanks to your higher credit scores, you’ll save more in interest and monthly payments.
USA Today did a great job of talking about exactly how much you can save on a refinance assuming you went from really bad to really good credit scores.
“A $20,000, 6-year car loan at a 10.4% rate equals monthly payments of about $375. After two years, the balance on the loan would be $14,657; but the consumer would still be facing $18,000 worth of payments (because of interest),” they wrote. “If the loan is refinanced at that point, the savings are dramatic. Payments would drop to $324 per month and the total remaining payments drop to $15,552. That’s just about $2,500 over the life of the loan.”
Now, this situation assumes that you’ve moved from subprime (the worst scores) to prime (really good scores). Most people don’t experience that big of a jump, but it all depends on when you got your auto loan. If it was two years ago, there’s a chance your scores could’ve moved from subprime to prime.
However, if you’ve only recently seen a big jump in your scores, you may not experience the same amount of savings you saw in the example above.
The best thing to do is to research lenders, pick two or three and get quotes for refinancing. When you decide which lender you’ll use, fill out your application and read through what they’re offering.
The key numbers are your interest rate, what you’ll pay each month and how much you’ll pay by the end of the loan.
6. Research Credit Cards in Your New Credit Score Tier
If you’ve moved up from bad to fair credit or from fair to good, there’s a good chance your eligible to apply for a new class of credit cards that weren’t available to you when your credit scores were lower.
The same thing will happen when you move from fair to good credit, too. One of the biggest differences will be APR, the interest rate you’re charged when you don’t pay your balance in full.
The Build Card’s APR is 29.9% and applies to all purchases the moment you make them, whereas the Citi Simplicity has an introductory APR of 0% for 21 months and a regular APR of between 13.99% and 23.99%.
The APR alone on these cards is a clear indication of the advantages you have with higher scores.
7. Don’t Go Out and Spend More Money Because of Your Credit Scores Are Higher
It can be easy to fall into the financial trap of thinking that you should immediately use your credit scores to your advantage.
Kevin Gallegos, vice president of Freedom Financial Network’s Phoenix operations, reinforced this to us as he talked to us about what consumers should do with their increased credit scores.
“Be happy, breathe a sigh of relief – and do nothing out of the ordinary,” he said. “A higher credit score is not a license to buy something. You should, however, maintain and improve it.”
The problem with excess spending due to higher scores is that, while your credit scores have gotten higher, your budget remains the same. Your salary is probably still the same as it was before your scores went up and so are your bills.
Basically, there’s nothing about your income and expenses that says you should spend more.
Can you get better auto insurance rates? Sure, and that’s worth pursuing. But should you use that saved money to go out and buy a new car or buy a home with your shiny new score? No.
“It may be time to pursue a loan application,” Gallegos said, “but only if you have created and are using a budget and if the payments for the new purchase fit into that budget.”
This is great advice; we’ve written about the importance of budgets and how, in our opinion, they are the single most powerful tool a consumer has. And, it only takes one or two hours to make one.
8. If You’re Prequalified for a Mortgage, Try Getting More Pre-Qualifications
This one is a tricky one because it won’t apply to a lot of consumers but for those who can use it, it could save you thousands.
The process of buying a home usually starts with a prequalification. You fill out a preliminary application with a lender and they generate a rough idea of your max mortgage amount, interest rate and various fees, all of which are based on your income, debt an credit scores.
A pre-qualification isn’t a contract, so you aren’t under an obligation to sign. Also, most credit scoring models will lump any credit checks you use for mortgage pre-qualification into one check instead of one for every application.
So, the idea is that, if your credit scores get a considerable boost, getting a new or other pre-qualifications could get you a lower interest rate based on your new scores. Even a change of a half a percent can save you thousands of dollars over the life of your mortgage.
The downside is that your score will drop one or two points if all your mortgage inquiries are done in a two-week span.
A Final Few Words About Higher Credit Scores
When your credit scores go up, it’s a cause for a little celebration. Higher credit scores mean better rates and better long-term financial options.
However, it’s important not to get so excited about your scores that you go out and make financial decisions that stretch your budget or are being done only because you have higher scores.
Here’s a quick summary of the advice in this article:
- Make a plan for moving up to the next credit tier
- Compare yourself to the average American’s credit stats
- Call credit card company for lower rates
- Shop for a better car insurance rate
- Refinance your auto loan
- Research credit cards in your credit-score tier
- Don’t go overboard with spending
- Consider a new pre-qualification
Aside from these tips, we’d say the most important thing you can do is create a budget and do everything you can to boost your credit scores higher and higher.