Expert Deems This Credit Score Is the Pinnacle of Financial Achievement
Whether you’re applying for credit or seeking housing, a good credit score can save you money and provide more options. But if you think you need a perfect score to get the best interest rates, you’re in for some welcome news. In an interview with CNBC’s “Make It,” Ted Rossman, a senior industry analyst at Bankrate, revealed that a credit score of 740 to 760 is likely all you need.
Rossman explained, “Typically, once you hit the mid-700s, you’re considered to have excellent credit and there’s no practical benefit to scoring any higher. It’s just bragging rights above that threshold.”
The most popular credit scoring model is the FICO score, which takes into account your payment history, credit mix, outstanding balances, credit history length and new credit accounts. It has a 300-to-850 range and a “poor”-to-“exceptional” rating scale. The suggested range of 740 to 760 falls in FICO’s “very good” category.
Rossman also emphasized how just 20 credit score points could affect your interest savings. You can test this out with myFICO’s Loan Savings Calculator for several loan types.
For example, a $250,000 30-year fixed-rate mortgage might have a 6.816% rate with a 760 credit score versus 7.038% with a 740 score. This higher score would save you around $13,379. And when comparing rates for scores of 760 versus 620, you’ll see a difference of $98,280 in interest.
To see where your credit score stands, you can turn to credit scoring services, the myFICO website or even your current bank. If it’s under the 740-to-760 range, you can take several steps to improve it and watch the score for changes. Rossman advised treating the process as “more of a marathon than a sprint.”
Assuming you’re already making on-time payments, which has the strongest impact on your score, paying off debts is a good place to start, as your credit utilization also has a high impact. You can also try asking current creditors to increase your limits, especially if they only do soft inquiries. Additionally, time will help you out as long as you avoid unnecessary new accounts and stay under 30% of your credit limits.
Once you have an ideal credit score and want to apply for credit, make sure you check with multiple lenders and compare rates. At the same time, keep in mind that lenders will look at additional criteria to make a lending decision. Some examples may include your debt-to-income ratio, employment history and, for mortgages and car loans, your down payment amount.
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