Is 730 a good credit score? Yes but it’s not “excellent” as many of the self-proclaimed “leading” credit card websites claim.

Sorry to burst your bubble, but if you have a 730 credit score you are not in the “excellent” category like this top ranking credit card site claims:

In fact, I can’t remember any time when a score of 730 was considered excellent. I remember several years ago (back in ’06 and ‘07 before the crash) my FICO was 729 and even with that, I still had difficulty qualifying for the Citi Dividend and the other best credit cards during that time.

And obviously, approval for credit isn’t any easier these days.

So why is it that so many credit websites and even a few financial pundits still believe 730 is top tier credit?

What 730 can (and cannot) do for you

First of all you should keep in mind that your score is not the only determining factor in whether or not you will get approved for a credit card or loan. Some of the other factors which are weighed heavily are:

• Income: No, I’m not saying you need to be raking it in, but rather you just need to be employed with at least an average income. If you submit an application and put some low figure like $10k for your annual earnings, you will almost certainly get rejected for any half-way decent card (exceptions can be made though for those who have significant assets – i.e. retired or rich).
• Debt: How much debt do you have? How do your debt levels compare to your total available credit? Even if you really do have a high score, a high debt to credit ratio might trigger a denial.
• History: It’s actually possible (and rather easy) to achieve a credit score of 730 at a relatively young age. When you’re 18 if you get a few credit accounts (cards and/or loans) and maintain a perfect payment history and low credit utilization on the card(s), then it’s not unusual to hit 730 by the time you are 20 years old. However you can bet that a 730 score coming from a 2 year old credit file will be scrutinized much more closely by the banks than a 10 year file with the same score.

So any one of the above factors can nix an approval, no matter what your score is. That being said, here’s what you can expect on average with a 730 FICO score…

Most (but not all) reward cards

You should have a good shot at qualifying for many of the hottest cash back and travel cards on the market, but not even 730 is a guarantee of approval.

If you look on the forum you will regularly see posts from people who have scores in the 730 to 750 range and sometimes they still get denied for some of the better reward cards from American Express, Discover, and Chase.

Good (but not the best) mortgage rates

According to MyFICO.com, the average score range to get the best rates is 760 to 850. If you have a 730 FICO score with a few years of history and nothing sketchy (no bankruptcy, delinquencies, etc.) you probably should still be able to get good rates… but they won’t be the best.

The uber-good car loans (hopefully)

You know those car commercials which tout 0% for 60 months – or when 0% isn’t being offered – the advertised rate may be another low number like 1.9% or 2.9%?

So what’s the minimum credit score requirement for a 0% auto loan, or whatever the lowest rate is?

To get the low rates you hear in the commercials, you will need to have what they deem to be “tier 1” credit. Most auto manufacturers have 3 (but sometimes 4) tiers of financing:

• Tier 1 = 720 to 850
• Tier 2 = 700 to 719
• Tier 3 = 670 to 699
• Tier 4 = 639 to 669

These are only examples. Keep in mind different auto manufacturer might have different score ranges for each of their credit tiers.

However the short and sweet story here is that fortunately, a 730 credit score should probably qualify you for tier 1 (the lowest advertised rates) or tier 2 (which will likely be couple percentage points higher).

Important warning about checking your score

Ultimately the 730 number doesn’t mean diddly-squat if you are going off of a different scoring model. Did you know that most websites which offer credit scores do not give you a FICO? Read my post about the Experian PLUS Score before you check your score.

Q: Hey there’s a good promotional offer on this credit card I’ve had my eye on for a while now. Haven’t applied for a new card in years and recently I heard that opening a new credit card will hurt your score. Is that true?

A: Will applying for a new credit card lower your score? Probably. But by how much? Well that depends…

There are 2 types of credit checks – soft and hard (hmm… easy opportunity for a joke here but I’ll leave that out). The latter – hard credit inquiries – are the type that might negatively impact your score.

Anytime you apply for credit – whether it be a card, loan, or even a new phone account – a credit check is performed. This is almost always a hard credit check and yes, it will show up on your credit report for 24 months. Fortunately, the FICO scoring model will only count them during the first 12 months, with their greatest impact is during the first 6 months.

So how much does applying for a credit card affect your credit score? Well, the higher it is, the more likely it will be hurt.

• If you have an extremely high FICO score of say 810, one credit inquiry may knock that down by as much as 10 points (based on experience and consumer feedback).
• However for “many people” the impact of applying for a new credit card will be “less than 5 points” or it “may not affect their FICO score at all” (source: MyFICO).
• For those with below-average or bad credit, the chances of it negatively impacting your score are lower, in comparison to someone with good to excellent credit (source: consumer feedback).

When you shouldn’t – and should – be worried

If you plan on applying for a mortgage or home loan within the next 6 months, then it’s probably best to not apply for any new credit cards right now. Even though the FICO score impact will probably be minimal, it’s better to be as squeaky clean as possible with major loans such as these.

But if a mortgage or home loan is not happening within the next 6 months, then I wouldn’t worry about possibly getting hurt with a [slightly] lower score. Remember 12 months from now that inquiry won’t affect your score whatsoever.

Actually if you don’ have plans to finance a home in the near future, then right now is actually the best time to apply for credit cards. Why? Because the average age of your credit accounts is part of your credit score. So if you’re going to get new card(s) you might as well do it now, so they have time to age. That way by the time you do apply for a mortgage or major loan, those new credit card accounts will be year(s) old and that should help boost your credit worthiness, assuming you manage your accounts responsibly.

While I don’t maintain an active subscription to any credit score monitoring service, on occasion I will signup for a free trial so I can check my FICO score (and then cancel the subscription before the free trial is up).

I did this last night and low and behold, the number came back about 10-15 points lower than I was expecting – I now have a 790 credit score.

Is 790 a good credit score? Of course. It *should* qualify you for the best on everything, from mortgage rates to credit card APRs.

However in my book, a credit score of 790 is totally unacceptable and needs improvement. Why? Because a few years back when the economy was darkest, I heard from many on the forum with scores of 10 to 25 points higher than that, who were getting approved with (a) pitiful toy credit limits, and/or (b) getting denied outright.

Conclusion? A credit score of 790 is good enough for now, but if the economy nosedives again, I need to be prepared with something better.

So what’s holding me down? Well this is what MyFICO is showing me…

I normally apply for several credit cards per year, but have been slowing that down in anticipation of buying a house soon. I only applied for 2 new ones so far this year and apparently, that was enough to weigh me down a bit. Underneath in the details it says:

“FICO High Achievers opened their most recent account 27 months ago, on average”

Now there’s no way I can go that long without applying for a new credit card, but it appears having one recently within the past 6-9 months might have an impact if you have a relatively high 790 credit score. Interestingly enough, the Citi card I applied for 10 months ago is apparently not an issue, only the ones which were within 6 or so months ago.

That being said, there are some other factors which are weighing me down too, which unfortunately, I have little control over…

• Payment History: Paying bills on time is something I can control, which is why it’s ranked as “Great.”
• Amount of Debt: My credit utilization rate (ratio of your revolving balances to credit limits) is great at 6%, which is right in line with their “High Achievers” average. However my guess is what’s hurting me is that I only have one installment loan and it’s for a very low amount. Two years ago I took the loan out on a used car purchase for the sole reason of getting an installment loan on my credit report. Being that I don’t have a mortgage or any other installment loans, low installment debt is likely weighing on me.
• Length of Credit History: This is the only category that’s just “Good” and is completely outside of my control. MyFICO tells me that the so called high achievers “opened their oldest account 19 years ago, on average.”  If you do the math that means I would have to be 37 years old to hit that average, assuming I applied for credit as soon as I hit 18 (which I did). So I have quite a ways to go to build my length up to that and unfortunately, there’s nothing I can do to speed up the process.
• Amount of New Credit: Notice that even with my new credit cards (2 this spring plus 1 last winter) I still come in at “very good” for this category. So opening an account here and there won’t kill you, but you probably just don’t want to do more than a couple per year.

Conclusion?

If you plan on applying for a mortgage within the next 6-9 months, it’s probably not the best time to be applying for new cards or other forms of credit.

That being said, if your goal is to surpass a 790 FICO score within the next 12+ months, then it might make sense to open a card or two now if you don’t currently have many on your account. That way the accounts will begin aging and in the future, they will help your average age of accounts. I have many, many, MANY credit cards and I know for a fact that definitely helps me – it keeps my total utilization low and all the accounts with perfect payment histories look good. But the key is to not have all your cards be recent acquisitions, but rather accumulating them over time and keeping them open.

Last but not least, if you get a triple credit score report, make sure the 3 credit score companies are providing you with real FICO scores (and not the VantageScore which runs on a 501-990 scale). I checked through the My Fico credit monitoring service to ensure I was getting the real deal. But whoever you choose, just make sure you are getting a FICO and not a FAKO.

Q: I recently checked my 3 credit scores and their average was 700 (702 to be exact). Is 700 a good credit score or not?

A: There is a TON of misinformation out there about being in this neighborhood. It is definitely within the “good” score range. Before “The Great Recession” a 700 would be enough to get you approved for almost every credit card. However since then, banks have gotten much more strict with granting credit. So while your credit score may have been considered good in the past, nowadays you may need the equivalent of a 730 to 750 just to do what was previously possible with a 700 credit score.

700 vs. the average score?
But is 700 good compared to average? Yes. I have seen several news stories lately that cite the average credit score in the country as being around 670. However during prosperous times the national average is closer to 680 or higher. But a 700 may be considered below-average in some parts of the country. For example, residents in many areas of the Midwest are known to have above-average scores when compared to the rest of the country.

Not all credit scores of 700 mean the same thing!
When people say “credit score” they are typically referring to a FICO score, which is by far the most widely used scoring system in America. It was developed by Fair Isaac Corporation in 1956, but has evolved over the years. It’s exact formula is a proprietary secret. The FICO score range runs from 300 to 850.

FICO essentially has a monopoly on the industry, so back in 2006 the three major credit bureaus (Experian, TransUnion, and Equifax) came out with VantageScore to compete. It runs on a 501 to 990 scale. So far is has yet to gain much traction in the industry. But is 700 good on the VantageScore scale? Nope! It’s only a “D” (they give letter grades for different ranges).

What can you do to improve your score?
Well we could write a whole textbook on the subject, but here are three easy tips to follow…

1. Have and use multiple lines of credit - If you seldom use credit cards and loans, your credit score isn’t going to be that good. Your credit score takes into account the types of accounts you have, how long you’ve had them, and your payment histories on them. It’s good to have an eclectic mix of different types of credit… installment loans (car loans, mortgage loans, student loans) and revolving lines of credit (credit cards).
2. Keep your credit card balances low – A small component is based on what percentage of credit you use on your revolving credit accounts (credit cards). No one knows the magic number for sure since the FICO formula is secret, but the consensus among most personal finance experts is you should never use more than 25% to 30% of your credit limit on any credit card at any time.
3. Manage all credit responsibly – Much of this is common sense… always pay your bills on time and of course never let any debt go to collections. Some people think that in order to get a good credit score, you need to carry balances on your cards… that is absolutely false! What is reported to the credit bureaus is the amount on your monthly statements (the amount due, before you pay it). So even if you pay in full all the time, that spending will still be showing up on your credit reports.

If you think your score might be improved by adding another revolving credit account to your profile, then check these credit card reviews and bonus offers