A 720 credit score on the FICO score scale of 300-850 is considered good. People with this credit score are likely to be approved for credit cards and loans with average interest rates and terms.
Only 8% of applicants in this score range are likely to become seriously delinquent in the future.
How to Improve Your 720 Credit Score
Your credit score shouldn’t be a mystery. Your FICO score from Experian includes a list of the factors that are impacting your personal score the most. Fix these issues first to see the biggest improvement in your credit score.
Why a Good Credit Score Matters
Having a high credit score can help you qualify for the best rates and terms on credit cards and loans. A “good” credit score is a great place to start, but it’s possible to earn a “very good” or even “exceptional” credit score and qualify for even better rates and terms. Working diligently to pay bills on time, pay down high credit card balances, and use credit wisely will help you achieve higher credit scores.
Tips for Improving Your Credit Score
To improve a credit score, it helps to understand how credit scoring models calculate credit scores, and what factors are included in those calculations.
- Payment history is the most heavily weighted factor in many credit scoring models. Typically, it can account for more than a third of your credit score. Paying all your bills on time per your agreement with the lender shows potential lenders that you are responsible about paying what you owe.
- The amount of credit you’re using compared to the total amount you have available is your credit utilization ratio, and is an important credit scoring factor. You can calculate your credit utilization rate by adding up your balances on your revolving credit accounts (such as credit cards) and dividing by your credit limit. Most experts recommend keeping your credit utilization ratio below 30% – so, for example, if you have a total credit limit of $10,000, you’d want to keep your balance below $3,000.
- How long you’ve been using credit is also a factor in most credit scoring calculations, too. Generally, the longer positive credit history you have, the more confident creditors can feel you are likely to repay your debt on time and as agreed.
- The total amount debt you have is another weighty factor in calculating your credit score. If you have a lot of debt, creditors may feel you would have difficulty repaying any additional debt.
- The number of new credit accounts you’ve applied for are considered hard inquiries on your credit report and can negatively affect your credit score. The impact of hard inquiries reduces over time. (Note that checking your own credit does not impact your credit score.)
Because it’s such an important factor in credit scoring, protecting your payment history is the single best thing you can do for your credit. If you have any past-due accounts, bring them current right away and continue to make payments on time, every time. Additionally, consider paying down high credit card balances to reduce your total debt and improve your credit utilization ratio, which positively affect your credit scores.
Opening and closing credit accounts can cause your credit score to take a hit. When you apply for new credit, such as a credit card, mortgage, or other type of loan, a hard inquiry is added to your credit report, which has a temporary negative impact on your credit score. Alternatively, when you close credit card accounts, your total available credit is reduced, which increases your credit utilization ratio and can harm your credit score.
Dealing with Negative Information on Your Credit Report
Late payments and other negative information on your credit report can have a lasting impact on your credit score. If the information is accurate, you’ll have to wait for it to cycle off your credit report and try to build a more positive credit history in the interim. (If the information is not accurate, you can dispute it.) Usually, the impact of negative information fades over time.
Here’s how long you can expect information to appear on your credit report:
- Late Payments and Past Due Accounts: Seven years from the original delinquency date, which is when the account first became past due.
- Collection Accounts: Seven years from the original delinquency date of the original account. (While you can’t remove the collection account early, paying it off can improve your credit score.)
- Hard Inquiries: Two years
- Chapter 7 Bankruptcy: Ten years from the filing date
- Chapter 13 Bankruptcy: Seven years from the filing date
- Tax Liens: Paid tax liens are removed seven years from their filing date. Unpaid tax liens remain on your credit report for ten years from the filing date.
- Civil Judgments: Seven years
- Paid or Closed Accounts: If there is no negative history, closed accounts are removed from your credit report 10 years after the account is closed.