How Your Credit Score Affects Your Mortgage Rate
Although its up to specific lenders to determine what score borrowers must have to be offered the lowest interest rates, sometimes even the difference of a few points on your credit score can affect your monthly payments substantially. For example, the difference between a 3.5 percent interest rate and a 4 percent rate on a $200,000 mortgage is $56 per month. Thats a difference of $20,427 over a 30-year mortgage term.
A low credit score can make it less likely that you would qualify for the most affordable rates and could even lead to rejection of your mortgage application, says Bruce McClary, spokesman for the National Foundation for Credit Counseling. Its still possible to be approved with a low credit score, but you may have to add a co-signer or reduce the overall amount you plan to borrow.
You can use Bankrates loan comparison calculator to help you see interest rates for credit scores.
Using myFICO.coms loan savings calculator, heres how much youd pay at the current rates for each credit score range. These examples are based on national averages for a 30-year fixed loan of $300,000.
| Source: myFico. APR rates as of Nov. 5, 2021. Assumes a $300,000 loan principal amount. |
| How your credit score affects your mortgage rate |
|---|
| FICO score |
| If your score changes to 640-659, you could save an extra $34,017. |
How To Improve Your 830 Credit Score
A FICO® Score of 830 is well above the average credit score of 704. An 830 FICO® Score is nearly perfect. You still may be able to improve it a bit, but while it may be possible to achieve a higher numeric score, lenders are unlikely to see much difference between your score and those that are closer to 850.
Among consumers with FICO® credit scores of 830, the average utilization rate is 7.7%.
The best way to determine how to improve your credit score is to check your FICO® Score. Along with your score, you’ll receive a report that uses specific information in your credit report that indicates why your score isn’t even higher.
Because your score is extraordinarily good, none of those factors is likely to be a major influence, but you may be able to tweak them to get even closer to perfection.
Whats Considered A Good Credit Score
If youre trying to build or maintain healthy credit, knowing whats considered a good score can be helpful. As you know, a good credit score can help you get approved and get better rates for loans and other credit.
Higher is generally better, but its hard to say specifically what a good score is. Whats considered a good score can differ by lender and based on the credit youre applying for. There are also different scoring models, so a good score may vary depending on what product or services you use to see your scores. That said, read on to learn what a good credit score range is when you check your score with TransUnion.
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You Might Qualify For 0% Interest
Not only does an 800 credit score practically guarantee you’ll be approved for most loans, you’ll also get a low interest rate. Some auto lenders occasionally offer 0% financing, but qualifying often requires a score 800 or higher. Zero interest financing is the same as paying cash, so you’ll save money over the life of the loan.
Even if your lender doesn’t offer 0% interest, an 800 credit score means you’ll qualify for the most favorable rates. This can lower your monthly payments and potentially increase buying power. And if you’re looking to take advantage of a credit card with a 0% introductory rate, a near-perfect credit score puts these accounts within your reach.
Strive To Achieve And Maintain Excellent Credit
Leveling up to the excellent range of credit takes time and effort, but it is totally attainable. Just do the common-sense things like consistently pay your bills on time and keep balances low, says Griffin.
Theres no big mystery or secret. In time, the scores will take care of themselves. And then instead of being a hindrance, your credit score will become a powerful tool for opening up the financial marketplace to better opportunities.
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Your Credit Score Wont Stay Static
What I find interesting about this latest credit score is that it actually went down one point since 2013 when I first wrote about joining the 800 club. There is no secret handshake. But there is a peace of mind youre always going to get the best terms with lenders.
Perhaps the credit score decline has to do with me paying off my rental condo in 2015 and paying off $815,000 of mortgage debt in 2017 after I sold my rental home. Hard to say because like a Lannister, I always pay my debts.
The other interesting thing about this credit report is that it says the scores range from a low of 334 to a high of 818, instead of a range of between 300 850. Equifax has a slightly different credit score range than Experian and TransUnion.
Finally, even though I got an 804, it still only ranks higher than 86 percent of U.S. consumers. This is a bullish indicator for the economy and the real estate industry. I thought a 804 would be at least in the top 5% for credit scores.
If someone like me who always pays his bills on time and has seen a healthy net worth increase since the financial crisis is still outranked by ~14% of Americans, then surely America as a whole is doing well. Go USA!
Readers, did you realize the average credit score in America is 710? What is your credit score? If the average American is richer and is more fiscally responsible, what would cause a deep recession?
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What Is The Highest Credit Score
For most situations, 850 is the best FICO score possible. It’s extremely difficult to reach a perfect credit score, though. Only 20% of Americans have a credit score of 800 or higher. Even if you’re one of the people with the best credit score in the country, you might not reach 850.
Wondering how to get a 850 credit score? Here are some ways to improve your credit score — and move closer to the highest credit score you can get:
- Paying off your credit card balance every month
- Correcting errors on your
- Keeping an old credit card open, even if you don’t use it often
- Paying your bills on-time
- Requesting an increase to your credit limit
If you reach a FICO credit score of 800 or higher, you should congratulate yourself. Raising your credit score takes hard work, dedication, and patience. Even if you don’t have perfect credit, an excellent credit score is something to be proud of.
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You Can Get Your Dream Job
Some employers include credit checks as part of the employment process. It isn’t enough to have education and experience anymore they want to make sure you know how to manage your personal finances before they trust you with the company’s finances. This is especially common with government jobs and jobs in the finance industry.
An 800+ credit score can push your application to the top of the pile. Let’s say three people applying for a particular job have the same amount of education and experience, yet two people have a credit score in the 600s and one has an 800 score. If the employer feels each applicant is a good fit for the position but can only choose one, there’s a good chance he’ll select the person with the highest credit score.
Percent Of The Us Population That Has A Fico Score Below 550
Fortunately, a low percentage of the U.S. population appears to have low FICO scores. Data released by FICO in 2019 reveals that only 11.1 percent of the U.S. population has a FICO score ranging between 300 and 54913.
It also reveals a downward trend, indicating that the average FICO score is on the rise and the average credit card debt and other debts are on the decline for Americans.
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Industry Specific Fico Scores
In addition to your general credit score, FICO also has two industry-specific scores: the FICO Auto Score, for autolenders, and the FICO Bankcard Score, for credit card lending. These scores are tailored to help lenders see how reliable you will be as a customer for that specific product. Mortgage lenders just use the general FICO Score.
These industry-specific FICO Scores have a range of 250-900, with 900 being a perfect score. If youâre looking specifically to get an auto loan or new credit card, it may be worth checking one of these two scores, though it isnât necessary.
These specific scores are similar to your regular FICO Score and so knowing the range of your general score is enough. The standard FICO Score is also the most popular and many lenders will simply use that.
Read more on whatâs a good credit score for buying a car.
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Paying Your Bills On Time
While paying each of your bills on time may seem like the most obvious way to improve your credit score, its also the most important one. There is nothing that will harm your credit score as much as having a series of late payments on anything from car loans to mortgage loans. This is why it is extremely critical that you always make the minimum monthly payments by the determined date each month WITHOUT ANY EXCEPTIONS.
Even skipping just one mortgage payment is going to have a detrimental effect on your credit score. Sorry if that sounds cruel, but its the truth, and it should serve as your primary source of motivation for making your payment on time.
Heres an important fact to keep in the back of your mind: every time that you fail to make a monthly payment when you are required to do so, whether it be on a car or your home or anything else, it will be on your credit history and thus impact your credit score for up to seven years. Seven years. Think about that.
Now, one primary benefit to using a credit card here is that you can choose how much money you spend while using them, and then also determine how much you pay back each month, so long as that amount is equal or greater than the minimum payment you owe.
The reason why this is a benefit to you is because it allows you to budget your money accordingly and make the smartest financial decisions you can. In other words, you can avoid going into serious debt.
What Are The Average 830 Credit Score Car Loan Rates In 2021
For those that have excellent credit scores, they can ensure that they will qualify for just about any type of loan that they wish to take out, whether it is an auto loan or a mortgage. Personal loans are also something that are easier for them to borrow with such a high credit score. It is important to provide proof of your income when applying for any loan, though.
| FICO Credit Score |
|---|
| 3.34% |
All the calculation and examples below are just an estimation*.Individuals with a 830 FICO credit score pay a normal 3.4% interest rate for a 60-month new auto loan beginning in August 2017, while individuals with low FICO scores were charged 14.8% in interest over a similar term.
So, if a vehicle is going for $18,000, it will cost individuals with excellent credit $326 a month for a sum of $19569 for more than five years at 3.4% interest. In the meantime, somebody with a lower credit score paying 14.8% interest rate without an upfront installment will spend $426 a month and wind up burning through $25584 for a similar auto. That is in excess of a $6015 distinction.
The vast majority wont fall in the highest or lowest class, so heres a breakdown of how an extensive variety of FICO scores can influence the aggregate sum paid through the span of a five-year loan:
| FICO Range | |
|---|---|
| $7,582 | $25,584 |
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Chief Factors That Affect Your Credit Score
The following factors may make or break your credit score:
- Payment history: learn from this history, repeat it. Timely payments go a long way. Payments are considered late when theyre 30-60 days past the due date. Timely payments go a long way. This might just be the best thing you can do for your credit score.
- the runner-up to payment history. This is the second most important factor to keeping an envious credit score. This is basically the amount of credit available that is being used by you. Financial advisors commend that each card you own should have a balance of below 30% according to your credit limit. Say if your limit $7000, the balance should be under or equal to $2100.
- Length of credit history: patience is a virtue and time is money. Both these things are the MVPs when it comes to building a rock-hard credit score. The longer the mean age of our account, the better.
- The type of credit in use: An assortment of different credit account types donates to a healthy credit score. A blend of debt and credit cards with a pinch of installment debt i.e. loans on automobiles or mortgages keep the credit score running in a smooth way.
- New credit: new credits or loans you apply for. This may simple but isnt so. Each new credit will help in eventually racketing up a good score, but the duration of our credit length is key here. The longer the length of our credit history, the less the new credit applications will harm our score.
What Does Not Count Towards Your 830 Credit Score
There are many things that people assume go into their 830 credit scores but that actually dont. Examples include how much money you earn, your age, your marital status, your child support payments , how much money you have donated to charity, where you work or live, or your employment history.
None of these things or anything like them do anything at all to your credit score, so instead, focus on the five primary factors that we outlined and discussed above.
Now that you know what counts towards your overall credit score and what does not, you should know exactly what you need to pinpoint in order to enhance your score. For example, maybe one reason your credit score is low is because youve opened several new accounts of credit.
Regardless, its important at this stage for you to positively identify what it exactly is that is lowering your credit rating. Once you have identified what that is, you can start to formulate a plan.
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What Is The Average Credit Score In Canada
While credit scores in Canada range from 300 – 900, the average is around 650, according to TransUnion, though it varies from province to province. Once you’ve reached a credit score of 650 or higher, you’ll be able to qualify for more financial products. A credit score below 650 is going to make it hard to qualify for new credit, and anything you are approved for will likely come with very high-interest rates.
Do you know your credit score? You can use Borrowell to get your credit score in Canada for free. With Borrowell, you’ll get weekly credit score updates, see exactly what’s impacting your credit score, and get personalized tips on how to improve your score. You can also find your free credit score here.
Check out this infographic that shows the average credit scores in Canada:
Can I Get A Personal Loan Or Credit Card W/ A 830 Credit Score
Like home and car loans, a personal loan and credit card is incredibly easy to get with a 830 credit score.
You donât need to apply for a secured card with Discover or Capital One, who may make you pay $500-$1000 just for a deposit.
You can get even better terms on your personal loan or credit card by repairing your credit and waiting a few short months until your score improves.
A 830 score means you likely have few-no negative items on your report. Removing any outstanding negative items is usually the quickest way to fixing your report.
We recommend speaking with a friendly credit repair expert online to help guide you through this process. Your consultation is completely free, no-pressure, and will set you on the right path toward boosting your score.
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Average Credit Score By State
Finances look very different across all 50 states, and the average credit score looks pretty different, too. While Mississippi has the lowest average credit score, Minnesota has the highest credit score at 720. Here’s the average credit score in each US state and the District of Columbia, according to data from Experian.
| State | Average credit score in October 2020 |
| Alabama | |
| 719 |