A good credit score makes it easier to get a loan and can allow you to get credit at a lower cost. A top rating gives individuals access to the lowest-rate loans and the lowest fees, which can save thousands of dollars over time.
Typically, the higher the score, the better. But what actual number is a good score depends on the type of loan and the lender's acceptable risk level and credit policies. If the score on a borrower's credit report is too low for one product ,it may be acceptable for other products. Likewise, if one lender turns down a request for credit,it does not mean that another one will. For instance, an automobile dealer may accept a lower score than a creditor who offers an unsecured line of credit.
To give you a general idea, however, 720 or higher points would be considered very good in mortgage lending, while 680 will require some scrutiny, perhaps resulting in a demand for more money down and/or a higher interest rate. However, the same score may be more than adequate when buying a car or shopping in a department store.
Having good credit scores makes your financial dealings a lot easier and can save you a lot of money in lower interest rates. That's why they are a vital part of your financial health.
Consider a person who is looking to buy his/her first house. The difference in the interest rates offered to a person with a score of 630 and a person with a 760 score is 1.59 percentage points, according to a Fair Isaac's data in March 2006. On a $216,000, 30-year fixed-rate mortgage, that difference would cost more than $82,000 extra in interest charges over the loan's 30-year lifetime. The difference in the monthly payment alone would be about $227.
**Mortgage payments for a $216,000 30-year, fixed rate mortgage
|FICO Score||Interest Rate||Monthly Payment||Extra Cost per Month|
|760 - 850||5.9%||$1,282||$0|
|700 - 759||6.13%||$1,312||$30|
|680 - 699||6.3%||$1,337||$55|
|660 - 679||6.52%||$1,368||$86|
|640 - 659||6.95%||$1,429||$147|
|620 - 639||7.49%||$1,509||$227|
Because the FICO score is calculated based on the information contained in your credit report, your FICO score will change as your credit history changes. There are several strategies that can be employed to improve your FICO score.
You may also use tools available for managing and comparing strategies for improving your FICO score. For instance, Fair Isaac's FICO® Saver for Home Buyers allows you to conduct several “what if” scenarios.
The best way to know what your credit score is to order one and review it carefully. It's a good idea to order your credit report once a year to make sure there are no errors on it. You can order your credit score from the following site.
We respect your privacy and will never abuse your email. Newsletters are published monthly and include summaries of all new content that is published on this site during the month.