For some reason, the 720 credit score has taken on mythical qualities. For some it is the goal in their credit repair journey. The myth is that at 720, a bell goes off and all the credit doors that have been closed to you will swing open. Champagne and caviar will be flown to your doorstep via private helicopter.
Ok, so maybe I got a little carried away there. However, like most myths, there is some truth behind the fantasy. What does your credit score mean? Let’s take a look.
You Don’t Have One Constant Credit Score
Your credit score is not like your name. You don’t get assigned your credit score and then carry it around for a year. When we talked about getting all three credit reports, we explained that there are three main credit reporting companies. We also explained that the credit reporting companies are in the information gathering business.
Each credit reporting company gathers information about you and your credit history. Therefore, you may have three different credit histories, especially when you consider the chance for errors.
Your actual credit score is calculated by applying a scoring model. The most commonly used scoring model is the FICO score, which is used by 95% of the largest financial institutions. Different models are used by different types of businesses that use credit scores. In theory, even if a lender was using the same scoring model, you could end up with each credit reporting agency due to variations in information.
Same FICO, Three Different Scores
Even though FICO supplies the scoring model for each of the three major credit reporting agencies, they have developed a different score for each agency. Each has its on name:
- Experian: Experian/FICO Risk Model
- Equifax: Beacon
- TransUnion: FICO Risk Score, Classic
So in addition to the variations in information, each score will likely be different. Different companies use different credit reporting services, so your score will depend on what company the lender is using.
720 Credit Score: A Moving Target
In addition to the different models, your score constantly changes based on the changes in your credit account. Your credit reports track you monthly payment history and your monthly balance history. A fluctuation in your balances or payments could result in a change in your credit score.
This means your score could vary even within the same month, depending on when your payments were due versus when the credit inquiry is made. So once you hit the 720 mark, it’s not a finish line. You could be there and back before you even knew it!
Finally, there is no universal magic number. On top of all the variations and fluctuations in your score, the credit decision is ultimately up to the lender. Each lender and each business has different standards and risk factors that it looks at in both your credit report and your credit score. A 720 may be perfect for some, and just not good enough for others.
Conclusion: A Worthy Goal
If you are reading this blog, you are likely here because you want to repair your credit. I was in the place when I started that 720 seemed like an impossible dream. I didn’t want perfect credit, I just wanted credit so I could do all the normal things in life. I wanted to buy a car without getting gouged. I wanted to own a house. I wanted to not be embarrassed when I was turned down for a promotion at work because my credit stunk.
A 720 credit score is not necessarily perfect, but its good enough to do most of the things I wanted to do. Therefore, I think from a credit repair perspective, 720 is a good number as a goal. Or pick a lower number that represents significant progress and improvement.
Above all, do something! Time is one of the great healers on your credit report and the sooner you start, the sooner the healing starts.
What do you think of the 720 credit score? Leave your comments below, we would love to hear from you!