I’ve been researching my credit score. I was fired for a while about two years ago and we took back some additional debts to settle. We got personal loans to solidify some of our payments, but we still accumulate debt elsewhere. This is a vicious cycle. That said, our credit scores are slowly recovering and we have been working hard to figure out what it takes to get a 720 credit score. This is what you need to know.
1. Understand the credit score of 720
The 720 credit score falls under the “good” category of the FICO scale, from 300 to 850. Most lenders consider the 720 score to be a reliable indicator that you can manage your credit well. It opens the door to favorable loan terms, including lower interest rates and higher approval opportunities. However, it is different from the “Excellent” score, usually starting at 800.
2. Privileges with 720 credit scores
With 720 credit scores, you are more likely to get competitive interest rates on loans and credit cards. Mortgage lenders usually retain their best interest rate with scores of 720 and above, saving you thousands of dollars in your life in your loan. Auto loan approval is also easier to obtain lower interest rates than average credit. In addition, credit cards that offer rewards, cashbacks and low APR are often reachable.
3. Why 720 credit scores may not be enough
Despite the stable 720 credit scores, it may not unlock the absolute best financial products available. For example, the minimum interest rate for premium credit cards and large loans usually requires a score of 750 or higher. The lender may review other factors, such as your debt-to-income ratio, which may affect your chances of endorsement. High balances on existing credit cards or recent hard inquiries may also limit your choice.
4. How to improve your credit score of more than 720
By focusing on key factors such as payment history and credit utilization, 720 credit scores can be improved. Repaying high balances and putting credit usage below 30% of your limit can have a significant impact. Diversifying your credit portfolio by adding a small amount of installment loans may also help. Limiting hard queries and avoiding new credit applications for months can prevent temporary score drops. It is crucial to always pay your bills on time as your payment history accounts for 35% of your FICO score.
5. Common mistakes that may hurt 720 credit scores
Even if you pay them off every month, it will carry high balances and may inflate your credit utilization. Closed an old account may shorten your credit history, thus lowering your score. A lack of a payment can cause tilt to take months to recover. Applying for multiple credit in the short term can lead to multiple inquiries, which temporarily lowers your score.
6. Is it worth targeting a higher credit score?
Raising your credit score from 720 to 750+ unlocks better interest rates and financial opportunities. For important loans like mortgages, higher scores can save thousands of interest. Credit cards with elite rewards programs usually require good approval scores. Additionally, higher scores can enhance your negotiating ability with lenders and provide you with peace of mind in a financial emergency.
Is the 720 credit score really that good?
Ultimately, the credit score is 720. You can get loans for almost anything you need, and you can get favorable terms for other financial products such as credit cards, banking and other opportunities. That said, it is still not considered “good”. Since your score reaches 850, you can continue to base your credit history and further improve your credit score, thus making your financial outlook from good to good.
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