Blog posted On June 17, 2020
Most American consumers are either working to improve or maintain their credit score. The FICO Credit Score, the most widely accepted credit score by banks and lenders, ranges from 300-850. The higher your score, the more favorable you will look to banks and lenders. As of May 2020, only 1.6% of consumers had a perfect credit score of 850. You should always be working to improve your credit score, but experts report having a score of at least 760 will get you the best benefits and terms on your credit cards and lines of credit.
Based on your FICO credit score, your credit is either very poor (300-579), fair (580-669), good (670-739), very good (740-799), or exceptional (800-850). Experian reports approximately 67% of consumers have at least good or better credit. When your credit is very poor you will likely be denied for any loans or lines of credit until you improve your score. If your credit is fair you may be considered for some loans, depending on other factors. For example, you may need a larger down payment on a purchase loan, or you may have a much higher interest rate on a credit card. Once you get into the “good” credit range, you’re more likely to qualify for better loan terms and lower interest rates.
Most financial experts agree to aim for the threshold of 760 or 780, especially if you are getting ready to apply for a loan or line of credit. CNBC Select contributor, John Ulzheimer (formerly of FICO and Equifax), reported, “the best published interest rates for auto loans are 720+ and for mortgages 760+. As such, I always tell people, shoot for 760 or better. That way, they’re safe for all loan types and cards.”
Perfect credit is certainly something to strive for, but it won’t necessarily get you a lower interest rate than a score of 760 or 780. In 2019, the national average credit score was 703, a record high, suggesting consumers are getting better at managing their credit and paying down debts. If you have any credit concerns before you apply for a new home loan or refinance, the earlier you talk to a loan officer the better. The sooner you start credit repair the better.