Why a 720 Credit Score Matters: Benefits and How to Achieve It
With a 720 credit score, you’re just a step away from the "very good" credit range. If you are not aware, having a good credit score opens doors to many financial opportunities.
But what exactly makes this number so desirable, and why are people striving to achieve it?
This guide will walk you through what’s in it for you if reach a 720 credit score.
Discover how understanding your credit report and credit score can transform your financial future. We’ll also explore whether this score is ranked as "good" by financial standards.
By the end of this topic, you’ll learn practical tips to help you boost your score even higher.
Contents
What is a 720 Credit Score?
Benefits of a 720 Credit Score
How to Achieve a 720 Credit Score
Common Misconceptions About Credit Scores
Strategies for Maintaining a Good Credit Score
The Long-Term Impact of a 720 Credit Score
What is a 720 Credit Score?
720 credit score
Remember the time when you were studying, and you were being graded on your performance? Your credit score works similarly, grading you on your financial habits.
A 720 credit score is like getting a solid B+ in school. It shows that you’re doing well and have good financial habits.
credit score range
A credit score ranges from 300 to 850.
A 720 score falls into the "good" range on the FICO scale, just shy of the "very good" category. This score is a sign of responsible credit use and management. It tells lenders that you are a low-risk borrower. This makes them more willing to offer you favorable terms on loans and credit cards.
Credit Score Breakdown
credit score breakdown
As of 2023, the average credit score in the U.S. is 715. Here's a breakdown of the credit score distribution among Americans:
21.2% have an exceptional credit score of 800 or above.
50.1% have a score between 700 and 799.
17.2% fall within the range of 600 to 699.
11.5% have a credit score below 600.
This means that over 70% of Americans have a credit score of 670 or higher, which is generally considered good or better (Experian) (LendingTree) (Experian).
If we look at the data, only 40% of Americans have a credit score in the range of 700 to 749. This means you’re doing better than a significant portion of the population. It reflects a history of timely payments, low credit utilization, and overall responsible credit behavior.
Keep reading to learn more about the benefits of a 720 credit score. Find out why so many people aim for this number and discover how you can improve your credit score.
Benefits of a 720 Credit Score
As I mentioned, having a 720 credit score comes with numerous benefits. You're probably wondering, "What's in it for me?"
Well, a 720 credit score is like a VIP card. Having that credit rating comes with financial perks and opportunities. It can save you money, open doors to better deals, and provide greater financial flexibility.
So let’s talk about the benefits of having a 720 credit score and see why it’s worth aiming for!
Lower Interest Rates
Low interest rates
One of the main perks of having a 720 credit score is access to lower interest rates on loans and credit cards.
For someone with a credit score of 720, interest rates on various types of loans and credit products are generally favorable.
Here's a breakdown of what you might expect:
Mortgage Loans
30-Year Fixed-Rate Mortgage: Interest rates typically range from 3.5% to 4.5%.
15-Year Fixed-Rate Mortgage: Interest rates are usually lower, ranging from 3% to 4%.
This can save you thousands of dollars in the long run.
Auto Loans
New Car Loan (60 months): Interest rates generally range from 3% to 5%.
Used Car Loan (36 months): Interest rates are slightly higher, typically ranging from 4% to 6%.
Personal Loans
Personal Loan: Interest rates can vary widely, generally ranging from 6% to 12%.
Credit Cards
Credit Card APR: Interest rates usually range from 13% to 20%.
These rates can vary based on factors such as the lender, loan term, and the overall economic environment.
Additionally, having a higher credit score can often help secure even lower rates.
Better Loan Approval Odds
A higher credit score can also improve your chances of getting approval for various loan products. Compared to having a lower score, if you have a credit score higher than 700, you can be sure that there will be a lender ready to give you a loan.
Lenders view a 720 score as a sign of financial stability. This makes them more likely to approve your applications.
Whether you’re applying for a mortgage, an auto loan, or a new credit card, a 720 score can significantly increase your chances of approval. It demonstrates to lenders that you have a history of managing credit responsibly, which makes them more confident in your ability to repay borrowed funds.
Comparison to a 600 Credit Score
If we’ll compare having a 600 credit score with 720, here’s an overview:
Loan approval odds 600 vs 700
Mortgage Loans
720 Credit Score:
Approval Odds: 90% or higher
Interest Rates: 3.5% to 4.5%
600 Credit Score:
Approval Odds: 50% to 60%
Interest Rates: 5% to 6.5%
Auto Loans
720 Credit Score:
Approval Odds: 85% to 95%
Interest Rates (New Car, 60 months): 3% to 5%
Interest Rates (Used Car, 36 months): 4% to 6%
600 Credit Score:
Approval Odds: 60% to 70%
Interest Rates (New Car, 60 months): 7% to 10%
Interest Rates (Used Car, 36 months): 9% to 12%
Personal Loans
720 Credit Score:
Approval Odds: 85% to 95%
Interest Rates: 6% to 12%
600 Credit Score:
Approval Odds: 40% to 60%
Interest Rates: 15% to 25%
Credit Cards
720 Credit Score:
Approval Odds: 90% or higher
APR: 13% to 20%
600 Credit Score:
Approval Odds: 50% to 60%
APR: 20% to 29%
A 720 credit score greatly increases your chances of loan and credit card approval with better terms and lower interest rates.
In contrast, a 600 credit score results in lower approval odds and higher interest rates, reflecting the higher risk perceived by lenders.
Higher Credit Limits
Credit card issuers are more inclined to offer higher credit limits to those with a 720 score.
This gives you more financial flexibility and can potentially improve your credit utilization ratio.
For example, if you have a credit limit of $10,000 and use $2,000, your utilization is 20%. A higher credit limit allows you to maintain a lower utilization ratio, which positively impacts your credit score.
Plus, having a higher credit limit can help you manage expenses more effectively and provide a cushion for emergencies.
Lower Insurance Premiums
Some insurance companies use credit scores to determine premiums for auto and homeowners insurance. A 720 score can help you secure lower rates.
For instance, you might pay $800 annually for auto insurance instead of $1,000. Over time, these savings add up. Insurance companies see a good credit score as an indicator of lower risk, meaning you’re less likely to file claims. This translates to lower premiums and more money in your pocket.
Negotiation Power
With a strong credit score, you have better leverage to negotiate terms with lenders and creditors. This includes interest rates and repayment plans.
For example, if you’re refinancing a mortgage or negotiating a credit card interest rate, your 720 score gives you a stronger bargaining position.
You can request lower rates and more favorable terms, potentially saving you significant amounts of money over the life of the loan. Lenders are more willing to work with you when they see you as a low-risk borrower.
Good Read: Negotiating With Creditors: Is it Worth The Effort?
You’ve learned how awesome a 720-credit score can be. Now, in the next section, let’s talk about how to get one!
How to Achieve a 720 Credit Score
Excited about the possibilities a 720 credit score offers? Let's learn how to make it a reality.
how to achieve a 720 credit score
Pay Your Bills on Time: Consistently paying bills on time is crucial. Payment history makes up a significant portion of your credit score, so timely payments are essential.
Keep Balances Low: Maintain a low balance relative to your credit limit. Aim to keep your credit utilization ratio below 30%.
Avoid New Credit Applications: Each new credit application can temporarily lower your score. Be selective about when and why you apply for new credit.
Check Your Credit Report: Regularly review your credit report for errors or discrepancies that could negatively impact your score. Dispute any inaccuracies promptly. Consider using ai credit repair software to streamline this process.
These tools can:
Build a Long Credit History: The length of your credit history affects your score. Keep older accounts open and active to demonstrate a long and stable credit history.
Common Misconceptions About Credit Scores
misconceptions
So, as they say, having a good credit score means you just have to pay your bills on time. But there’s actually more to it.
Read this guide about: All About Credit Repair and Why it Matters to fully understand the broad spectrum of credit scores.
Here are some common misconceptions about credit scores that you should be aware of:
Misconception 1: Checking Your Own Credit Score Lowers It
Many people believe that checking their own credit score will negatively affect it. This is not true. Checking your own credit score is considered a "soft inquiry" and does not impact your score. It's a good practice to regularly monitor your credit to stay informed and detect any errors early.
Misconception 2: Closing Old Accounts Improves Your Credit Score
Some think that closing old credit accounts will boost their credit score. In reality, closing old accounts can actually hurt your score. This is because it reduces your available credit and can shorten the length of your credit history, both of which are factors in your credit score.
Misconception 3: Only Credit Card Debt Affects Your Score
While credit card debt does influence your credit score, it's not the only type of debt that matters. Auto loans, mortgages, student loans, and other types of credit also impact your score. It's important to manage all forms of debt responsibly to maintain a good credit score.
Misconception 4: You Only Have One Credit Score
Many believe they have a single credit score, but this is not the case. There are multiple credit scoring models, such as FICO and VantageScore, and each can produce different scores based on the same credit report. Lenders might use different scores depending on the type of credit you are applying for.
Misconception 5: A Higher Income Means a Higher Credit Score
Your income does not directly affect your credit score. Credit scores are based on your credit history, including factors like payment history, credit utilization, length of credit history, new credit, and types of credit in use. While a higher income can help you manage debt more effectively, it does not directly influence your credit score.
Misconception 6: Paying Off Debt Immediately Increases Your Score
Paying off debt is a positive step, but it may not immediately boost your credit score. It takes time for credit bureaus to update your information. Additionally, your score considers a variety of factors, so paying off debt is just one piece of the puzzle.
Misconception 7: You Don’t Need Credit Repair Services or Software Once You Reach 720
Some believe that once they achieve a 720 credit score, they no longer need credit repair services or software. However, maintaining a good credit score requires ongoing effort.
Ai credit repair software can help monitor your credit, identify potential issues early, and provide strategies to maintain or further improve your score. It can also help dispute any inaccuracies that may arise, ensuring your credit report remains accurate.
Understanding these misconceptions can help you make better decisions to maintain or improve your credit score, like aiming for and keeping a 720 score.
By staying informed and managing your credit responsibly, you can avoid these common pitfalls and ensure a healthier financial future.
Strategies for Maintaining a Good Credit Score
Automate Payments: Set up automatic payments to ensure you never miss a due date. This helps maintain a positive payment history.
Diversify Your Credit: Having a mix of credit types (e.g., credit cards, auto loans, mortgages) can enhance your credit profile.
Limit Credit Inquiries: Too many credit inquiries in a short period can negatively impact your score. Space out applications for new credit.
The Long-Term Impact of a 720 Credit Score
Achieving and maintaining a 720 credit score can have lasting benefits for your financial health. We have talked about it earlier, how it opens doors to better loan terms, lower interest rates, and increased financial opportunities.
Save serious cash. Lower interest rates on everything from homes to cars mean more money in your pocket. Imagine those extra bucks piling up over time!
Unlock more opportunities. With a 720 credit score, you're more likely to get approved for loans, credit cards, and even better rental deals. Your options widen, and that’s pretty cool.
Build a strong financial foundation. A good credit score shows you're responsible with money. This habit helps you save for big goals like buying a home or starting a business. Plus, it gives you peace of mind knowing you can handle unexpected costs.
Feel good about your finances. When you have a solid credit score, you'll feel more confident about your money. Less stress, more happiness – that’s what we’re talking about!
So, a 720 credit score isn't just about numbers; it's about enjoying life more. It's your key to financial freedom and peace of mind.
Ready to Improve Your Credit Score?
Whether you're aiming to reach a 720 credit score or maintain your current score, focusing on responsible credit habits is key.
How Disputely Can Help
Disputely offers an AI-powered solution to help you achieve and maintain a high credit score. It identifies errors in your credit report, automates the dispute process, and provides personalized credit repair plans.
With Disputely, you can ensure your credit report is accurate and up-to-date, helping you reach your credit goals more efficiently.
Interested in learning more or getting personalized advice?
Let's chat about how you can achieve your credit goals and secure a stronger financial future.
