The two most popular credit scoring brands, FICO and VantageScore, both feature a current credit score range of 300 to 850. It’s common knowledge that the higher your credit score, the better. Yet, if you are like most consumers, you probably wonder what score you need to qualify for the best interest rates and the best terms on a mortgage or car loan.
So where is that threshold? Is a 700 credit score the magic number? Or is the target higher or lower? What score does it actually take to make you a lock for the best deals and interest rates?
Important Credit Score Thresholds
You already know that working to earn higher credit scores is a wise use of your time and efforts. Goal oriented individuals often like to have a specific number to shoot for as they work to improve their credit scores. Unfortunately, there is no uniform answer to the question “What’s considered a great credit score?” The reason why there’s no uniform answer is because lending is subjective.
For one lender, a 700 credit score might be considered great and could qualify you for financing at the lender’s most attractive rates and terms. However, another lender might consider a 700 credit score still a bit of a risk. Each individual lender will select their own credit score thresholds based on a variety of factors, including the company’s past experiences with previous borrowers.
Although there’s no uniform standard used by lenders to determine which scores will be considered “bad,” “fair,” “good,” and “great,” there are some general guidelines. If you like to set specific goals for yourself as you work to improve your credit score, then these are good benchmarks to keep in mind:
Terrible Credit Scores: 300 to 619
If your credit scores fall in this range, then you may have difficulty getting approved for a loan at all. When you do manage to receive an approval it will likely be much more costly, as you’ll almost certainly be subject to higher interest rates and fees. Consider yourself lucky if you get approved, and look carefully at the fees and interest rates you’re agreeing to.
Below-Average Credit Scores: 620 to 699
In this range you’ll generally find that getting approved becomes an easier process. However, this shouldn’t be your end game. While you probably won’t be denied outright for most types of financing, you may still be faced with higher costs (and some loan options may still be unobtainable).
Above Average Credit Scores: 700 to 749
With a 700 credit score or better, you’re going to get approved and you’re going to get a pretty decent deal. In fact, you may get the best deal the lender has to offer. But, there are some lenders that will not give you their best rates until you score even higher. So, continue to attempt to improve your scores, because a 700 credit score is not the magic number.
Great Credit Scores: 750 and Above
When you finally reach the upper echelon of credit scoring the odds are high that you will finally be able to enjoy the very best deals that lenders have to offer — those super-low rates you see advertised. Rather than trying to improve a credit score in this range, you should take more of a “defend and protect” strategy and just continue to do the things that got you here in the first place, such as paying your bills on time.
Remember, it’s the lender that will ultimately make the decision about whether your credit score is considered bad, fair, good, or great. The lender will also determine which rate and terms they wish to offer you based upon a variety of factors, especially the condition your credit.
Related Articles:
- Here’s How Much Your Credit Score Impacts Your Mortgage and Auto Loan Rates
- How Often Does Your Credit Score Change?
- You Can Improve This Part of Your Credit Score Almost Immediately
The post Is a 700 Credit Score the Magic Number? appeared first on The Simple Dollar.
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