760 Credit Score: What It Means for You And How To Reach It
Unless you can pay cash for everything, including homes and vehicles, you need a credit score in the U.S. Achieving a great credit score can take time, but there are milestones along the way that show you're taking the proper steps.
That's what this series is about, and today, we'll discuss a 760 credit score, what it means for you, and how you can get there.
Credit score ranges
These are the credit score ranges:
300 to 579: Poor
580 to 669: Fair
670 to 739: Good
740 to 799: Very Good
800 to 850: Excellent
760 credit score
Once you've reached a 760 credit score, you're in the Very Good range. There is still room for improvement, but you can take a deep breath when you see that 760! 760 is the magic number creditors are looking for when deciding to extend credit to a potential customer.
A 760 will almost always get you a "Yes" when you apply for credit cards, even the premium ones that come with sexy perks and loans.
But more importantly, a 760 credit score is high enough to be offered the best interest rates when you borrow money. And this is important; interest rates are the price of borrowing money, and the lower the rate, the more you save over the life of the loan. When you're talking about five and six-figure purchases like a home or vehicle, a lower interest rate can save you tens of thousands of dollars.
Reaching a 760 credit score
If your score is not yet at 760, you can take steps to get there.
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Mind your federal student loans
The issue around federal student loan forgiveness is yet to be resolved. As it stands in the Spring of 2023, forbearance is set to end either 60 days after the Supreme Court rules on the matter or 60 days after June 30, 2023.
The most significant factor in your credit score is payment history, making up 35% of your score. If you have federal student loans, keep an eye on the news so you know if and when you need to resume payments. Federal student loan payments are reported to the credit bureaus, so they impact your score. A single missed payment can really drop your score.
Lower utilization
Utilization is how much credit you're using compared to how much credit you have. The typical advice is to keep utilization under 30% for the health of your credit score. But if you're looking to make the final push to a 760 credit score, the fastest way to do so is to further lower utilization, as utilization makes up 30% of your credit score.
There are two ways to reduce utilization; paying down balances and asking for a credit increase. If you have a good payment history and your balances are relatively low, credit card companies may automatically increase your credit limit, but you can also call and ask them to do so.
Don't close accounts
If, in the process of lowering utilization, you pay off a credit card entirely, you might be tempted to close the account. This is a mistake. Closing accounts both increases utilization (because it lowers the total amount of credit you have available) and decreases the age of your history, another factor in your score.
And sometimes, the issuer will close a credit account if there has been no activity on it for a certain period of time. If you don't want to use a card any longer, rather than close it, just put a single recurring charge on it, like a Netflix subscription or gym membership, and then set up an automatic payment so you're never late and the account remains active.
In our next article, we will discuss the next credit score milestone, an 800 score.