What is a credit score of 720? Here’s what you need to know!
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I’ve been working to improve my credit score since a while. Around two years ago I was laid-off for a time, and we ended up getting into debt to make ends meet. We took out a personal debt to consolidate our payments. However, we ended up accruing more debt in other areas. This is a vicious circle. Our credit scores have slowly started to rise and we are trying to determine what it takes to reach a score of 720. Does that mean that it’s not good enough? Here’s what you need to understand.
1. Understanding a 720
Credit scores of 720 fall into the “good category” on the FICO scale. The range is 300-850. A 720 credit score is considered by most lenders to be a reliable indicator of your ability to manage your credit. This opens up the possibility of obtaining favorable loan terms such as lower interest rates or higher approval odds. It’s still not the same thing as an “excellent” credit score which starts at around 800.
2. Benefits of Having A 720 Credit Score
With an average credit score of 720, you are more likely to be eligible for low interest rates and competitive credit card offers. Mortgage lenders reserve their best interest rates for those with scores above 720, which could save you thousands of dollars over the course of a loan. With lower rates, car loans are easier to get than for those with poor or average credit. Credit cards that offer rewards, cashback, and low APRs can also be obtained. Why a Credit Score of 720 Might Not Be Enough
While it is a good score, it may not be enough to unlock the best financial products. Credit cards with premium features and loans with low interest rates often require scores of 750. Your debt-to income ratio could be scrutinized by lenders, and this can affect your chances of approval. You may also be limited by high balances on your existing credit cards, or recent hard inquiries. How to Improve Your Credit Score Above 720
You can improve your 720 credit rating by focusing on factors such as payment history and credit usage. It is important to pay off large balances, and keep your credit utilization below 30% of the limit. Diversifying your mix of credit by adding a small loan could also be helpful. Avoiding new credit applications and limiting hard inquiries for a few month can help prevent temporary drops in your score. Payment history is a major factor in your FICO score. Common Mistakes That Can Hurt a 720 Credit Score
Carrying high balances, even if you pay them off monthly, can inflate your credit utilization ratio. Closing accounts can reduce your credit score. Even missing one payment can result in a drop that may take months to recover. Multiple credit applications in a short time can cause several hard inquiries and temporarily lower your score.
6. Is It Worth Aiming for a Higher Credit Score?
Elevating your credit score from 720 to 750+ can unlock even better interest rates and financial opportunities. A higher credit score could save you thousands of dollars in interest on large loans, such as mortgages. A high credit score is often required to be approved for elite reward programs. Additionally, a higher score can enhance your negotiating power with lenders as well as provide you with peace of mind during financial emergencies.
Is a 720 Credit Score Really That Good?
At the end of the day, a credit score of 720 is solid. A credit score of 720 will allow you to obtain a loan, as well as favorable terms on other financial products such a credit cards, banking and other opportunities. It’s important to have a good credit score for your personal finances.
