An introduction Credit score is a three-digit number that helps lenders understand how creditworthy you are in terms of repaying the credit. FICO scores range from 300 and 850 most of which are considered to be good depending on the higher end of the scale. Some of the benefits of a good credit score include the ability to get the best loan terms such as low interest rates. However, there is a moment where having a higher score does not guarantee getting a better deal. Occasionally, this section will look at a scenario where your credit score may not be important.
Tips for Buying Auto Loans Meeting the best auto loan rates are often associated with very good credit scores, namely, 740 and above. Several papers have demonstrated that people with scores of 800 will be charged half a percentage point less than those with scores ranging from 740 to 799 when obtaining a $25,000 auto loan. However, gaining half a point is not a significant improvement in the level of savings, even if every little bit counts. In some cases, this may be as little as about three dollars a month on the average five-year auto loan. It is at that stage that the effort to draw your score up those few more points might not be worth the effort for a slightly lower loan rate.
When Applying for Apartment Rentals Tenants often have their credit reports and scores checked by the landlords before they are granted permission to rent a house. However, some may set qualifying scores that the applicants should attain for them to be considered instead of analyzing each incremental score. For example, a landlord may accept all applicants with a credit score of approximately 700 and classify them as such without discriminating against applicants with scores below 700. In that case, an increase to 750 or 800 or beyond the 700 that you have achieved will not necessarily have any effect on your application. Everyone’s policy is unique but the rule of thumb is that after passing a minimum credit score threshold, other factors such as income, employment history, and references are considered more than the score itself.
When Looking For a Low-Rate Credit Card In general, if you want to be approved for the best cards with fantastic rewards and 0% introductory APR, you should have a credit score higher than 760. But if your objective is a bare basic vanilla card with a low regular purchase interest rate, you do not need the best credit scores. Average cards are those with an interest rate of between 15% and 20%, and you can get these as soon as your credit score is above 670. It is wiser to pay off your balance in full rather than to transfer the balance to the next month. However, if your primary goal is to get an easy and cheap line of credit, it is not crucial to focus on the 800+ score.
When Trying to Refinance Student Loans When the federal student loans are consolidated into a new private loan, interest rates and monthly payments can be reduced. However, since this means incurring new debt, lenders look at individuals with excellent credit, sometimes above 740. Most of the lenders have a cut-off at 740 so getting a higher score will not increase your chances. The advantages of refinancing are known to gradually decrease once your credit is within that range. It is a good increase from 710 to 790 but the better loan offers might not be significantly different in this case.
When You’ve Maxed out Available Credit Although, having access to more total credit is desirable, having your credit cards and every loan you have utilized to the maximum, will pull down your score because it is perceived as a higher risk. However, there are times when one just has to utilize the credit that is availed – for instance in a health or employment crisis. At that point, your score will decrease no matter where you started, whether it be with 750 or 800. As to the impact, it is the same. Instead, it should work on lowering balances gradually in the accounts to achieve a favorable credit score. Once your debt utilization falls back below 30%, you should be able to get a similar score increase from 700s back over 750 or 800 in the long run.
The Takeaway A credit score of above 700 is desirable to optimize the chances of getting approval to borrow and other benefits such as low interest rates when making large purchases such as a house or a car. But in many cases, once your score climbs to a ‘good’ level of 700 or 740, an even further increase of 100 points and above may not make a real difference and add value to the range of loan offers and their likely interest rates. But even the slightest positive shifts entail quite an elaborate effort if your credit rating is already in the Excellent category. In this instance, it is only logical to direct your energy somewhere else.
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