Is 674 a Good Credit Score? What It Means for You
Understand what a 674 credit score means for your financial life. Learn its implications and how to improve it.
A credit score numerically represents an individual’s creditworthiness, summarizing their financial behavior for lenders to assess risk. Higher scores typically indicate lower risk.
A 674 credit score falls into a specific range, and its “goodness” is relative, depending on financial goals and lender criteria. This score can open doors to various financial products, though terms may differ from those offered to individuals with higher scores.
Understanding Credit Score Ranges
Credit scores are categorized into distinct tiers, representing different levels of credit risk. Common categories include Poor, Fair, Good, Very Good, and Excellent, helping lenders understand an applicant’s credit profile.
A 674 score generally positions an individual within the “Good” or “Fair” range, depending on the scoring model. While acceptable for many financial products, it is not top-tier. Individuals with “Excellent” scores (often above 800) typically receive the most favorable terms.
Key Factors Determining Your Score
Your credit score is influenced by several major components that reflect your historical financial conduct. Understanding these elements clarifies how your score is calculated.
Payment history is the most significant factor, demonstrating your ability to meet financial obligations consistently. Timely payments on credit accounts, such as loans and credit cards, contribute positively to your score. Conversely, late or missed payments can negatively impact your credit standing.
Credit utilization represents the amount of credit you are currently using compared to your total available credit limit. Maintaining a low utilization ratio, ideally below 30% of your available credit, is viewed favorably. High utilization can indicate an over-reliance on credit and may lower your score.
The length of your credit history also plays a role, as a longer track record of responsible credit use is a positive indicator. This factor considers the age of your oldest account, the age of your newest account, and the average age of all your accounts. A well-established credit history demonstrates consistent debt management over time.
New credit inquiries and recently opened accounts can influence your score. When you apply for new credit, a “hard inquiry” is placed on your credit report, which can slightly lower your score for a short period. Opening multiple new accounts within a short timeframe might suggest a higher risk to lenders.
Your credit mix, referring to the different types of credit accounts you hold, can be a minor contributing factor. Having a variety of accounts, such as both installment loans (like a car loan) and revolving credit (like a credit card), can show your ability to manage diverse forms of debt. While less impactful than payment history or utilization, a healthy mix can slightly enhance your score.
Navigating Financial Opportunities with a 674 Score
A 674 credit score generally allows access to a range of financial products, though specific terms may vary. This score demonstrates acceptable creditworthiness for many lenders. Understanding typical outcomes can help you plan your financial endeavors.
When seeking loan approvals, such as for mortgages, auto loans, or personal loans, a 674 score usually makes you eligible for consideration. However, it is common to encounter interest rates that are somewhat higher than those offered to individuals with excellent credit scores. Lenders perceive a slightly elevated risk, which they compensate for by charging more for the borrowed funds. For example, a mortgage applicant with a 674 score might face an interest rate a half-percentage point or more higher compared to someone with a score above 740, leading to thousands of dollars in additional costs over the loan’s life.
Regarding credit card approvals, numerous options will likely be available with a 674 score. Many standard credit cards designed for individuals with good to fair credit will consider your application. However, premium credit cards, often associated with extensive rewards programs or exclusive benefits, might be more challenging to obtain or may come with less favorable terms, such as lower credit limits or higher annual percentage rates (APRs), compared to top-tier applicants.
For rental applications, a 674 score is frequently acceptable to landlords and property management companies. This score typically meets the minimum credit requirements for many rental agreements. Nevertheless, some landlords, particularly in competitive housing markets, might prefer applicants with higher scores or could request an additional security deposit.
Credit scores can also play a role in determining insurance premiums in some jurisdictions across the United States. Certain insurance providers may use a credit-based insurance score as one factor in calculating rates for auto or home insurance. A 674 score may result in slightly higher premiums compared to individuals with higher credit scores.
Strategies for Credit Score Improvement
Improving a 674 credit score involves consistent financial discipline and strategic management of your credit accounts. Focusing on specific actions related to the factors that determine your score can lead to positive changes over time. Small, consistent efforts can yield significant improvements.
Making all your payments on time is the single most impactful action you can take. Setting up automatic payments for your credit cards and loans helps ensure you never miss a due date. Consistent on-time payments demonstrate reliability to lenders and positively reinforce your payment history.
Keeping your credit utilization low is another effective strategy. Aim to keep your credit card balances well below 30% of your available credit limits. Paying down existing debt rather than just moving it around can significantly reduce your utilization ratio.
To benefit from the length of your credit history, avoid closing old, established credit accounts, even if you no longer use them regularly. Closing an old account can reduce your overall available credit and lower the average age of your accounts, which might negatively impact your score. Keeping older accounts open, even with a zero balance, can be advantageous.
Limit applications for new credit to only when absolutely necessary. Each time you apply for a new loan or credit card, a hard inquiry is recorded on your credit report, which can slightly lower your score for a short period. Spreading out your applications and avoiding opening too many new accounts simultaneously helps prevent multiple hits to your score.
Regularly reviewing your credit reports from the major credit bureaus is a prudent step. You are entitled to a free copy of your credit report from each of the three major credit bureaus annually. Checking these reports for errors or inaccuracies and promptly disputing any incorrect information can prevent mistakes from negatively affecting your score.