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If you’ve been told your credit application has been turned down because your credit score didn’t meet the lender’s standards, you might wonder why 740 is many lenders’ minimum and if 740 is a good credit score. Yes, it is, and in this article, we’re going to tell you why and how to earn an even higher score.
- You can buy and do more with a 740 credit score
- Improving your credit score is achievable
- People with a 740 credit score don’t overextend themselves with credit
- Once you reach a credit score of 740, you can raise it with a little effort
What Can You Get with a 740 Credit Score
In a word – more. With a 740 credit score, you can buy, borrow, and earn more.
When a credit card company, bank, mortgage lender, student loan issuer, a personal loan provider, insurance company, or even an employer “runs your credit,” they’re trying to determine if you’re creditworthy. They need to know if you’re a reasonable risk. For most lenders, 740 and above is the target number.
With a 740 credit score, you can borrow as much as $100,000 or more.
In an era of tightened credit standards, 740 is a good credit score. In fact, according to one of America’s largest credit card issuers, Capital One, 740 is better than good; it qualifies as an “excellent” credit score and substantially improves the chances of being approved for a loan.
It’s understandable if you’re discouraged from having a credit score of under 740 and don’t qualify for the credit limit you’re applying for, but there are alternatives that will help you establish or repair your personal credit.
Some card issuers are more lenient in extending credit to those with fair-poor credit scores and issuing certain cards specifically for that purpose. This includes:
- Mission Lane Visa
- Capital One (Quicksilver & Platinum secured cards)
- Open Sky (secured card)
- Navy Federal Credit Union (secured card)
Secured cards require a cash deposit to reduce the risk to the lender of late or missed payments.
How to Get a 740 Credit Score: Tips and Strategies
Achieving a credit score of 740 or higher is attainable by anyone willing to follow these tips:
- Review your credit reports regularly. Lenders often make data entry mistakes or leave outdated information on your report. Review your credit reports at least annually. You can receive a free credit report every week through December 2023 from AnnualCreditReport.com.
- Pay your bills on time. Your credit score depends heavily on making on-time payments to your creditors. If you need help with making payments on or before their due date, consider setting up automatic payments through your bank or alerts to remind you to make them.
- Keep your credit utilization at or below 30%. For example, if your credit limit is $10,000, use no more than $3,000 of it at a time. Your credit rating will be lowered if your balances creep beyond that benchmark.
- Limit applying for new accounts. A “hard credit pull” occurs when your credit score is checked, typically when you apply for a new credit card, loan, or line of credit. Limit how often you apply for new accounts, and don’t submit multiple applications at the same time. It will drop your score, and it’s a red flag to lenders.
- Don’t close old accounts. Even though you don’t use paid-off accounts, don’t close them. Keeping them open helps maintain the length of your credit history, which will help your score.
Following these tips will help you earn that 740+ score, but patience will be required. Your credit score takes time to build; it doesn’t happen overnight.
How to Scale Up and Achieve an Excellent Score
Once you’ve achieved that 700+ credit score, it’s time to climb to the next level and reach a score of 800 to 850, which is the maximum score you can earn.
If patience is not one of your virtues, add these three steps if you want to speed the process up:
- Pay down your balances quickly. Use your tax refund, pay increase, commission check, bonus, inheritance – any extra money that comes your way to pay your balances down and reduce your credit utilization rate. Again, you want that rate to be 30% or under.
- Increase your credit limit. This will also improve your score by lowering your utilization rate. You might not need a higher limit, but appearance is important to lenders reviewing your credit report.
- Have negative entries that are paid off removed from your credit report. Having paid collection accounts or written-off balances on your credit report hurts your score. Removing them will give it a quick boost.
These three steps will also take some time, but once completed, expect your score to rise to the level of excellence you’re reaching for.
Should You Pay to Have Someone Repair Your Credit?
You can do anything a credit repair agency can do, without having to pay a fee.
For example, a credit repair agency will review your credit report, contact creditors that have entered negative data on your report, and attempt to get that information removed, which is nothing you can’t do on your own.
There are many credit repair scams that have been perpetrated against unsuspecting consumers, which is why the Credit Repair Organizations Act was passed in 1996. It ensures that if you’re considering using a credit repair company, they will disclose the actions they’ll take and their fees upfront.
If you feel you must have a third-party help you understand your credit report and contact creditors on your behalf, there are attorneys who can help or you may consider working with a non-profit credit repair organization, such as American Consumer Credit Counseling.
A 740 Credit Score vs. Other Credit Score Ranges
Credit rating services use several credit scoring models, but most, including Equifax, use these credit score ranges to decide how creditworthy you are:
800 to 850: Excellent
If you’re in this range, you are considered a low-risk borrower and will have an easier time getting credit or loan approval than borrowers with lower scores.
740 to 799: Very good
Being in this range answers this article's fundamental question: "Is 740 a good credit score?” Yes, absolutely. Some credit experts say this range is as advantageous as being in the highest range. Your credit limit may not be as high, but your acceptance rate should be.
670 to 739: Good
Lenders see you as a lower risk in this range. The more conservative the lender, the lower the approval rate and credit limit you’ll receive. When you are approved, you might find it difficult to be approved for more credit.
580 to 669: Fair
Being in this range often gets you labeled as a “subprime borrower.” You may need to settle for secured credit cards with lower credit limits until you climb to a higher range. Paying bills on time and having accounts removed that were under collection but are now settled will help.
300 to 579: Poor
If you’re in this range, you’re finding it difficult to get approved for new credit. You’re going to have to follow the steps outlined above before you’ll be able to secure additional credit.
The Characteristics of People With a 740 Credit Score
We often read biographies of people we admire because, as business philosopher Jim Rohn put it, “Success leaves clues.”
Knowing the characteristics of people who have hit the 740 credit score can help you make financial changes that will help you reach your credit score goals and other objectives that are important to you.
Here are some habits of those with very good credit that you can aspire to:
- They pay their bills on time. 96% of consumers with a credit score of 800 pay credit accounts on time, compared to 68% of those with a score of 650 that have accounts past due.
- They minimize their use of available credit. Those with a score of 800 use only 7% of their available credit. Conversely, most people with a score of 650 have maxed out their available credit.
- They maintain low or no balances. One of their goals is never to pay interest, which they achieve by paying their balance in full every month. Many do this by logging into their credit card account after making a purchase and paying it off immediately.
- They only apply for credit when necessary. People with a score of 740 or higher have very good credit because they’ve earned it over time. They’ve established a healthy mix of credit cards, mortgages, auto loans, and sometimes personal loans. As such, they rarely need to apply for additional credit and only when necessary.
The Benefits of Monitoring Your Credit Score Regularly
Just as keeping track of your weight is good for your physical health, monitoring your credit score is beneficial for your financial health.
By monitory your score at least quarterly, you’ll be able to:
- Detect if new accounts have been opened or credit inquiries made without your knowledge
- Contact creditors concerning any inaccuracies they’ve reported
- Monitor your credit availability in one place
- Verify payments you’ve made to creditors have been applied to your account
- Measure your progress and see if your score is rising or falling
If your credit score is fair to poor, you may feel reluctant to consistently look at your credit report. However, the “head in the sand” approach never works. Building or rebuilding your credit starts with being aware of your current situation, then setting small, incremental goals to improve it.
Knowing your credit score can either be a confidence booster or a self-image buster. But remember, your credit score doesn’t measure your value as a person.
If you want to better your score or keep it at the level it’s at, pay your bills on time and be responsible with your credit cards. Having credit could be compared to using matches – it will either provide the fuel you need to reach your financial goals or burn your finger if you don’t pay attention to it.