How Good Is a Credit Score of 740?

FT Contributor

It’s a good idea to review your credit report on a regular basis. If you’ve done so recently and found that your score is 740, you may be wondering whether that is a good or a bad score.

According to the FICO credit score model, the five categories of credit consist of poor, fair, good, very good, and exceptional. These are scored according to the following ranges:

  • Very Poor: 300 to 579.
  • Fair: 580 to 669.
  • Good: 670 to 739.
  • Very Good: 740 to 799.
  • Exceptional: 800 to 850.

If your score is 740, then you’ve officially made the cut into the “Very Good” credit score range. This means you have a solid and respectable credit score that will help you access a variety of different financial benefits.

However, there is still room for improvement. Technically speaking, a score of 740 is still 110 points away from a perfect score, and with good reason, too. There are many small-yet-significant activities that can hold your score back, even at 740.

Use the content below to better understand what led to your current score, what opportunities it opens up, and how you can improve it going forward.

Table of Contents

Why Your Credit Score Is 740

There are countless factors that go into a good credit score. Here are a few of the areas that tend to impact your score the most.

Your Credit History

Your credit history is a critical factor that can make or break your credit score. It particularly includes your payment history. This one item alone is responsible for over a third of your total score. Your ability or inability to consistently make payments on time is a crucial factor in maintaining your credit.

Your Total Debt

The total sum of your borrowed money is another important factor. Even if you make payments on time, if you borrow an excessive amount of cash, it can hurt your score and make you appear riskier to lenders.

Your Credit Age

The age of your credit is also important. This includes the average age of all of your credit sources. The older your credit the better. This means if you’re young or you suddenly open up multiple new lines of credit, it can hurt your score.

Your Credit Utilization Ratio

Your credit utilization ratio is the total amount of borrowed money divided by the total amount of credit you have available. If this number gets to be over 30% per account, it can hurt your credit score.

Your Credit Differentiation

If you have multiple lines of credit, it naturally boosts your score. This shows that you can handle auto loans, a mortgage, credit cards, and other credit options responsibly and at the same time.

Hard Inquiries

A hard inquiry takes place when a potential lender makes an official credit check before loaning you money. The inquiry can remain on your report for up to two years and hurt your score for around 12 months of that time.

Derogatory Marks

Finally, and often most importantly, derogatory marks can seriously impact your credit score. With a score of 740, you likely don’t have a dramatic mark on your report, such as a foreclosure or bankruptcy. Nevertheless, other marks, such as a past due loan payment or a debt settlement can stay on your report for up to seven years.

While these are all generally important, each score is specifically beholden to your own particular financial activity. The good and bad repercussions of your own fiscal habits and decisions create your own unique score.

With that in mind, review the previous list and consider how each of the items has impacted your own score for better or for worse. With a very good score, many of the activities will be on the positive side of the ledger.

However, you may find situations that unexpectedly hurt your score. This analysis can help you gain a better picture of how your score came into being and what steps you can take, even now, to improve it.

What Can You Do With a 740 Credit Score?

While it may not be exceptional, a Very Good credit score gives you access to a large variety of benefits. For example, you can:

  • Get approved for a loan: From a mortgage to auto, home equity, and other personal loans, a Very Good score makes it much easier to be approved to borrow funds.
  • Get lower interest rates: When you borrow money, a score of 740 can reduce the interest rate, as you’ve proven yourself to be more trustworthy than someone applying with only Good credit.
  • Get an apartment: A landlord will often check a potential tenant’s credit score to see if they’re able to make their payments on time.
  • Other perks: Along with the above benefits, a Very Good score also improves your ability to negotiate with a lender, be subjected to smaller security deposits, and qualify for both higher limits and more rewards and benefits when you open up a credit card.

There are many benefits that come with a 740 credit score. However, that shouldn’t stop you from continuing to improve your score for even greater savings.

How to Improve a 740 Credit Score

While a 740 score is Very Good, it’s still just on the bottom end of that credit score range. With that in mind, it’s wise to continue to work to improve your score. Here are a few suggestions for ways to do so:

Maintain What’s Already Helping

Start by committing to the activity that is already helping you achieve a 740 score. From a stellar payment history to a low credit utilization ratio, identify what it is that you do well and then steer into that skid.

Make Adjustments Where Necessary

As you reviewed the list above, you likely found areas where you either are making mistakes or could at least be doing things better. This could include things like paying down debt, using your revolving credit regularly, or fully paying off your credit cards every month. Work to develop these shortcomings into healthy new financial habits.

Review Your Credit Report

Finally, take the time to review your free annual credit report on a yearly basis. Look for any errors and make sure to dispute them. If you have a legitimate derogatory mark, take the time to resolve the issue. Then send a goodwill letter requesting forgiveness and a withdrawal of the mark from your report.

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