What happens if your credit score increases by 20 points?

Your credit score is a number that tells lenders how much risk they are taking by lending you money. The higher the score, the less risky the borrower appears to be, which means he or she may be able to get approved for a loan or credit card, as well as receive a more favorable interest rate.

For example, increasing your credit score by 100 points can open up many opportunities for you to get a loan. But what about a 20 point increase? Will that make a difference? The quick answer is that it depends.

In some cases, it may not be effective.

Here’s how credit scores are classified in the context of FICO® Scores, the most commonly used credit scoring model in the U.S., according to Experian.

• 300~579: Bad
• 580~669: Normal
• 670~739: Good
• 740~799: Very good
• 800~850: Excellent

Let’s say your credit score is 810 and it goes up to 830. That’s great, but it may not really change things from a borrowing perspective. A lender willing to lend you money with a score of 830 would likely also lend to you with a score of 810 because both numbers are great.

Likewise, let’s say you can increase your credit score from 530 to 550. This is a step in the right direction, but you may still have trouble getting a loan, usually due to bad credit.

When credit score increases by 20 points do help

In some situations, increasing your credit score by 20 points can go a long way in helping you with your loan options. First off, you need a minimum credit score of 620 to qualify for a conventional mortgage. So, if you can get a score between 605 and 625, you will exceed that threshold. (Of course, this doesn’t guarantee you’ll get a mortgage, as you may not meet the lender’s income requirements, but it at least makes you a viable candidate.)

Likewise, it is not uncommon for certain credit cards to have minimum credit score requirements. Unlike mortgages, there are no blanket requirements. One card may require a minimum score of 680 points, while the other card may require a minimum score of 700 points. And generally, the better the compensation, the higher the credit score requirements. However, this is another situation where even a small increase in your credit score can have a real impact.

Slow and steady wins the game

Even a one-time 20-point increase in your credit score may or may not affect your ability to get a better loan. But remember, a series of 20-point boosts can help you a lot.

For example, if your credit score goes from 640 this month to 660 next month and then to 680 the month after that, your score has suddenly gone from fair to good. This can help you qualify for a loan you may have been denied.

For this reason, it’s a good idea to work on improving your credit score. One of the best ways to do that is to pay all your credit card bills and loans on time.

In the former case, payment is considered timely if you send the minimum payment by the due date. However, it is best to try to pay off the balance in full each month. Another way to actually improve your credit score is to lower the balances on various credit cards relative to your total spending limit.

Lastly, check your credit report for errors every few months. Correcting your mistakes can help you make rapid progress. You can request a free copy of your credit report from each of the three reporting agencies once a week.

Improving your credit score just once by 20 points may not be a game changer for you. But you can be much happier if you choose a loan option with a series of 20-point increases.

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