How rare is a 720 credit score?

The Importance of Having a 720 Credit Score – How often does it occur?

A credit score is a three-digit figure that is supposed to measure your credit rating. They present the lenders with an understanding of how capable you are to repay a loan given the credit that you have taken in the past and how you have paid it. The credit scores are usually numbers between three hundred and eight fifty. FICO is the widely used credit score model that is the most popular among consumers.

Well, how often can people achieve a credit score of 720 or more? A credit score of 720 is referred to by many credit institutions as a good score. Nonetheless, few citizens of the United States are fortunate to possess these high credit scores. Let us now analyze the data and figures that accompany it.

How Credits Are Rated

According to the analysis of a sample of over 200 million credit reports by FICO in 2019, here is how credit scores in the US are distributed:

• Regarding the credit score, 22. 6% of people have poor credit, and the score is below 600.
• 8 % of clients have credit scores ranging from 600-660, deemed as ‘Fair’ credit scores.
• Paying credit 15. 3% score 661-720 refers to ‘good credit’.
• 7% have scores ranging between 721-850 which may be considered as very good to excellent credit rating.

From the above samples, you can see that only 29. 9% of people in the US have credit scores that FICO has qualified as very good to exceptional.

Less than one of five, or 15. 3 percent of the population, has credit scores between 661 and 720. Therefore, according to statistical data, scores above 720 place any individual in the league of the top 30% of Americans who possess the best credit scores in the nation.

This is because only 1. 4 % of the population have a FICO credit score of 850 which is the highest one possible.

720 is considered a good score because 720 is equal to at least one–third of the highest possible score, which is 1800.

Credit scoring models like FICO take into account five main factors to calculate someone's score:

1. Payment history
2. Credit utilization ratio
3. Length of credit history
4. A mix of credit accounts
5. New credit applications

A score of 720 means that the person has no missed payments, uses credit cards properly, has a utilization rate lower than 20%, has a credit history of more than 7 years, and has a few hard inquiries as they open credit accounts from time to time.

The score of 720 is relatively low compared to other scores but is still considered relatively high to ensure borrowers get a good interest rate from the lenders. It is possible to observe that a person having a score in the low 700s is usually regarded as a low-risk consumer in terms of payment troubles or failure to pay loans.

As such, a credit score of 720 can exert enough pressure on the banking and credit institutions to extend the borrower's mortgages, auto loans, credit cards, and other lines of credit at low rates.

For instance, the FICO database reveals that the best mortgage rates are given to individuals with a score of between 720-850 while subprime rates are offered to those with lower scores. It is not necessary to take high rates when such a score is possible, is it?

Building Credit to 720

For those curious about the amount of time it takes to reach a credit score of 720 – it’s going to take as long as it is. The credit and financial status of every individual differs and is distinct in its special way.

If for instance, you have had one or more of the items in your credit file that pull down your score such as missed payments, collections, or high relative debt to income, it might take several years or even more to overcome this hurdle. It is also beneficial to correct information in your credit report or challenge false information that has been reported.

The keys to responsible credit habits over time include:

• Ensure that every bill is paid on time each month
• Keep credit card balances low, that is below 30% utilization of the total available credit.
• Use credit cards for new credit sparingly to give accounts sufficient time to become aged.
• Check credit score with free annual credit reports to ensure any errors are corrected
• Check the control inquiries by preventing the creation of new queries.

As a result, adherence to these credit best practices is essential for creating and sustaining scores over 720 even for a prime borrower. Having accounts that are several years old also assists in extending the length of the credit history component utilized in the scoring models.

The Takeaway

A FICO credit score of 720 ranks in the top 32% of Americans and it may be considered relatively average even though few people have a perfect score of 850. Failure to pay off the outstanding debts on time and maintaining a low debt balance for many years gives most people a low credit score and hence they are unable to achieve this credit score level.

However, at 720, consumers get an opportunity to take cheap rates on loans and other credit products which are closed on those with lower scores, which make up 69% of the population of the United States. So although it may not be all that unheard of to have a credit score as high as 800, it should be lauded as something that opens up the best credit for borrowers.

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