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740 credit score: A guide to credit scores

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    • A 740 credit score is considered to be a “good” or “very good” credit score.
    • You may have access to greater financial possibilities with a 740 credit score, such as approval for loans and credit cards of your choice.
    • Improving a 740 credit score from good to “exceptional” is possible with patience and consistency. 

    If you want to check your credit score remember that you can do so by enrolling in Chase Credit Journey®, a fee tool for everyone, even if you don’t have a Chase account. If you have a 740 credit score you are on the right path. But what does that mean, and is it possible for your score to go even higher? Let’s explore this in more detail below.

    Understanding and managing your 740 credit score

    A credit score of 740 falls within the very good or good credit score ranges depending on the scoring model used. It indicates responsible credit management and increases the likelihood of being approved for loans and credit cards with favorable terms. For the VantageScore®, a 740 credit score falls into the good category. The ranges for this scoring model are:

    • Excellent: 781 to 850
    • Good: 661 to 780
    • Fair: 601 to 660
    • Poor: 500 to 600
    • Very Poor: 300 to 499 A 740 FICO score falls into the very good category.

    The FICO model categorizes the ranges of credit scores as follows:

    • Exceptional: 800+
    • Very Good: 740 to 799
    • Good: 670 to 739
    • Fair: 580 to 669
    • Poor: 579 and below

    Benefits of a 740 credit score

    As you could see from the credit score ranges, a 740 credit score is seen as good and very good by VantageScore and FICO scoring models, respectively. This category puts you into a tier where you can access certain financial opportunities that are not typically available to those whose scores fall within lower ranges. These may include, but are not limited to:

    • Access to better interest rates and loan terms. Individuals with a 740 credit score are more likely to qualify for loans and credit cards with lower annual percentage rates (APRs), resulting in significant savings over time.
    • Higher chances of loan approval. Lenders are more inclined to approve loan applications from individuals with a 740 credit score due to their demonstrated creditworthiness and lower risk profile.
    • Lower insurance premiums. Some insurance companies consider credit scores when determining premiums. A higher credit score, such as 740, may lead to lower insurance premiums for auto, home, or other types of insurance.
    • More negotiating power with lenders. A 740 credit score gives individuals leverage when negotiating loan terms or interest rates with lenders. Lenders are more likely to offer favorable terms to borrowers with a strong credit history.

    Your borrowing opportunities with a 740 credit score

    With a 740 credit score, if you remain diligent about protecting your score, you can gain access to several types of options for your borrowing needs. For example, according to Experian™, you generally need a minimum of a 620 credit score to get approved for a mortgage as part of the application process. Of course, credit scores are just part of the larger picture, so you must consider other factors such as downpayments.

    Additionally, you may have a higher chance of getting approved for a credit card you’ve been interested in getting. You may be able to gain access to premium credit cards, those with perks and rewards (though sometimes with higher annual fees).

    Factors affecting your credit score

    To help you better understand why your score has reached this tier, let’s dive into the factors that go into calculating your score. These include:

    • Payment history. This is a significant factor in determining credit scores. Consistently making on-time payments positively impacts credit scores, while late or missed payments can have a negative impact.
    • Credit utilization ratio. This ratio refers to the percentage of available credit that an individual is using. Keeping your total sum of credit card balances low, ideally below 30% of your total credit limit, can positively impact credit scores.
    • Length of credit history. The length of credit history is an important factor in credit scoring models. A longer credit history demonstrates a borrower's ability to manage credit responsibly and can positively impact credit scores.
    • Credit mix. Having a diverse mix of credit accounts, such as credit cards and other loans, can positively impact credit scores. It shows lenders you have the ability to manage different types of credit responsibly.

    Preserving your good/very good credit score

    Now that you know what goes into your score, you can take several steps towards maintaining it. To preserve your credit score, you should:

    • Make your monthly payments on time. Consistently paying bills on time is crucial for maintaining a good credit score. Late or missed payments can have a significant negative impact on credit scores.
    • Keep credit card balances low. Keeping credit card balances low (30% or less is considered ideal) can positively impact credit scores. A high credit card utilization ratio can indicate a greater risk for default.
    • Avoid opening unnecessary credit accounts. Given that your present score falls within the good/very good range, you'll likely be targeted with a lot of invitations to open credit card accounts. Be cautious. Opening multiple new credit accounts within a short period can negatively impact credit scores. This is because lenders run a hard inquiry (or credit check), which can decrease your score in the short term.
    • Regularly check credit reports for errors. Monitoring credit reports for errors or inaccuracies is essential, and just one of many ways of protecting your credit. Disputing and correcting any errors can help maintain an accurate credit history and prevent potential negative impacts on credit scores.

    Each of the above steps can help you preserve your score. In fact, doing all of them consistently, such as making timely payments and avoiding excessive debt, is crucial for maintaining a good credit score. It demonstrates financial discipline and creditworthiness.

    Help improve your 740 credit score

    If you’re ready to take your credit score to the next level into exceptional territory, here are a few steps you can take:

    • Pay off outstanding debts. Paying off outstanding debts can positively impact your credit score by reducing credit utilization and demonstrating responsible financial management.
    • Keep your credit utilization low. Lowering credit card balances and maintaining a low credit utilization ratio can improve credit scores over time. To do this, you may need to make some changes to your current budget. 
    • Build a longer credit history. You can build a more robust credit history if you keep old credit card accounts open, even if you use them sparingly. Maintaining accounts open and responsibly managing credit can positively impact credit scores.
    • Diversify your credit mix. Having a diverse mix of credit accounts, such as credit cards, mortgages and other loans can positively impact credit scores by demonstrating the ability to manage different types of credit responsibly. Note that applying for new accounts can temporarily hurt your score initially due to hard inquiries that your potential new lender will run in order to approve them.
    • Monitor your credit report. This is essential for protecting and helping to improve your 740 score. Review your credit report to identify and dispute any errors or address potential fraudulent activity.
    • Consider enrolling in Credit Journey®. This free online tool anyone can use allows you to track your score without impacting it. You can also use the credit score improvement tool, where you receive a personalized action plan provided by Experian. This plan is created based off on your financial situation and goals and provides steps that you can take to help improve your score over time.

    In conclusion

    Maintaining and improving your credit score takes time and patience, but it’s important to remain diligent to be closer to a bright financial future. A 740 credit score already indicates that you've established sound financial habits. Be sure to continue to make appropriate financial decisions as you continue to grow and expand your credit history.

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