If Your Credit Score Is Under 740, Make These Moves Now 

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A 740 credit score can be a noteworthy accomplishment, but it still leaves room for improvement. If you’ve got a decent credit score in the 700s and want it to improve or prevent it from dropping, check out these tips for help. 

Credit Score Factors

Credit scores can be complicated, and different card issuers might use different scoring models to determine your score. However, there are some common factors you can expect to have a big influence on. Understanding these factors will make it easier to raise your credit score:

• Payment history: Whether you always pay on time or regularly make late payments has the biggest impact of all credit factors. If you are in the latter category, this is one of the biggest opportunities to improve your score.
• Credit utilization: How much of your available credit you use greatly impacts your score. In general, you should use less than 30% of your total available credit.
• Average credit age: Creditors like to see you are a dependable borrower. Thus, if your average credit age is a decade or longer, your credit score will get a boost.
• Credit mix: Credit card issuers like to see you don’t just have credit cards. Having other types of credit, such as a student loan and an auto loan, can raise your score.
• New credit: Each time you apply for new credit, your credit score will dip slightly. This effect lessens over time.

Is a Credit Score Below 740 Bad?

A score below 740 isn’t bad, but it’s not at the highest end of the range, either. If your score is 660, for example, you will still have access to some decent financing options.

While there are a few different credit scoring models, these are the most common ranges:

• Below 580: Poor
• 580 to 669: Fair
• 740 to 739: Good
• 740 to 799: Very Good
• 800 and up: Excellent

If your credit score is only slightly below 740, you fall within the “good” or “very good” range. This means your credit score is slightly above average (source) but still less than a perfect 850 score. You might have some work to do, but you’re actually not to far away from where you want to go!

How To Improve Your Credit Score

Daniel Cohen is the Founding Partner of Consumer Attorneys and co-chairs the firm’s Consumer Finance practice. He says the first step is to start with continual awareness of how your score is doing.

“If you have a decent credit score, then you’ve already got the basic framework for financial management, so you’re on the right track.” He adds, “I recommend paying attention to your credit score and credit profile using daily or weekly check-ins via banking or credit card apps if you can. It helps build a more nuanced understanding of which activities impact your score.” 

While a 740 credit score certainly demonstrates great credit habits, it probably won’t allow you to qualify for the very best, top-notch rates. Fortunately, you can take some easy steps to raise your credit score. Try these additional tips to boost your score.

Pay on Time

If your credit score is below 740, you might have missed a payment or two in the past. But payment history is one of the most important credit score factors, so paying on time is key if you want to improve your score.

Even if money is tight, you can set up an automatic payment to pay at least the minimum balance every month. That way, you know you aren’t risking a hit to your credit score.

Lower Your Utilization

Another important credit score factor is your credit utilization. This factor is exactly what it sounds like: how much credit you are using against the total amount available to you.

From the creditor’s perspective, you might be having financial trouble if you are using up a large percentage of your credit, making you a bigger risk. It can also make it hard for you to pay it off. There is no definite rule here, but the generally accepted principle is that you should keep your utilization below 30%.

R.J. Weiss is a Certified Financial Planner (CFP) and the founder of The Ways To Wealth. He recommends another way to decrease your utilization, “For a quicker increase, consider asking for credit limit increases on your credit cards to improve your credit utilization ratio. However, make sure they won’t pull your credit when asking for an increase, as you also want to avoid hard inquiries.” 

He adds a caveat, however, “Opening a new line of credit can help in the long term but may hurt in the short term due to the new inquiry and reduced average account age. I’d avoid opening a new credit before major purchases like a home. However, if you have a few years to plan, it can be beneficial.”

Don’t Apply for New Credit

Your credit score will most likely drop when you apply for new credit — this is what’s known as a hard inquiry. The impact of hard inquiries fades over time, so you aren’t permanently lowering your credit score by applying for new credit. Still, if you will soon be applying for something that calls for a good credit score, like applying for a mortgage, it’s worth keeping in mind.

Don’t Close Accounts

Maybe you still have an old credit card a parent opened for you, and you just want it out of your sight. While there can sometimes be credit cards you might want to close, that doesn’t mean it’s always a good idea.

This is because your average credit age — how long your credit accounts have been open on average — is a factor in your credit score. So, if that old credit card doesn’t have an annual fee, it’s often best to just keep it open. While this isn’t the biggest credit score factor, it can still make a difference.

Don’t Carry a Balance

Many people carry a balance on their credit cards, but that doesn’t mean you should. The problem with carrying a balance is that it will lead to more interest piling up, which can make it more difficult to make your payments. In the long run, this will only bring your credit score down, not up.

Bottom Line

If your credit score is at or below 740, you may just need to clamp down a tad more on your credit habits. Still, in this range, your score is still pretty respectable. Taking a few simple steps, like making on-time payments and reducing your credit utilization, can go a long way in improving your credit score.

Bob Haegele contributed to a previous version of this article.

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