Your credit score is important when you’re looking for a loan. A good credit score can get you a lower interest rate, which means you’ll save money on your loan.
But what is a good credit score?
A good credit score is important to have if you want to be approved for a loan, mortgage, or credit card. Generally, you need a score of at least 700 to be approved for the best interest rates. If your score is lower than that, you may be able to still get approved, but you’ll likely have to pay a higher interest rate.
So, it’s important to know what your credit score is and work to improve it if necessary. You can get your credit score from a variety of places, including credit reporting agencies. You can also get a free credit report once a year from each of these agencies.
Here’s a look at what credit score you’ll need for different types of loans:
Mortgage
A credit score of 700 or higher will give you the best interest rate on a mortgage. If your score is below 700, you may still be able to get a mortgage, but you’ll likely have to pay a higher interest rate.
Examples of mortage rates for different scores:
Score of 760 or higher: You’ll qualify for the best mortgage rates, example : a 30-year fixed-rate mortgage with a 4.5% interest rate.
Score of 620 to 659: You’ll qualify for a mortgage, but you’ll likely have to pay a higher interest rate, example: a 30-year fixed-rate mortgage with a 5.5
Auto Loan
A credit score of 650 or higher will get you the best interest rate on an auto loan. If your score is below 650, you may still be able to get an auto loan, but you’ll likely have to pay a higher interest rate.
Examples of auto loan rates for different scores:
- 720-850: 3.633%
- 690-719: 4.084%
- 660-689: 5.376
Personal Loan
A credit score of 700 or higher will get you the best interest rate on a personal loan. If your score is below 700, you may still be able to get a personal loan, but you’ll likely have to pay a higher interest rate.
Examples of personal loan rates for different scores:
- 720-739: 10.00%
- 700-719: 10.50%
- 660-699: 12.00%
Credit Card
A credit score of 670 or higher will get you the best interest rate on a credit card. If your score is below 670, you may still be able to get a credit card, but you’ll likely have to pay a higher interest rate.
Examples of credit card rates for different scores:
- 720-850: 15.00%
- 660-719: 17.99%
- 620-659: 22.74%
As you can see, having a good credit score is important if you’re looking for a loan. If your score is below 700, you may still be able to get a loan, but you’ll likely have to pay a higher interest rate. Work on improving your credit score so you can save money on your loan.
Reasons why your score can be low
There are a few reasons why your credit score might be low.
- One reason could be that you have a lot of debt. If you have a lot of debt, it may be hard for you to keep up with your payments. This will negatively affect your credit score.
- Another reason could be that you’ve missed a lot of payments. If you miss payments, it will show up on your credit report and will negatively affect your credit score.
- Sometime credit score may fall without any reasons about which you can read more here. In this case, you can get a copy of your credit report from all three major credit bureaus (Experian, Equifax, and TransUnion) to make sure there are no errors on your report. If you find any errors, you can dispute them with the credit bureau.
Some ideas to improve your credit score
- Review your credit report for any inaccuracies and correct them as soon as possible.
- Make all of your payments on time, including utility bills, credit card bills, and mortgage or rent payments.
- Keep your credit balances low.
- Use a mix of different types of credit, such as installment loans and credit cards.
- Avoid opening too many new credit accounts in a short period of time.
Taking these steps can help improve your credit score over time. If you have any questions or need help correcting inaccuracies on your credit report, contact a reputable credit counseling or repair service. They can help you understand the steps you need to take to improve your credit score.
Credit counseling and credit repair services are two different things. Credit counseling services can help you understand your financial situation and develop a plan to improve your credit score. Credit repair services may try to remove inaccurate information from your credit report or negotiate with your creditors to remove negative items. Be sure to research any credit counseling or repair service you’re considering before you sign up.
If you’re looking for more tips on how to improve your credit score, visit the Federal Trade Commission’s website at FTC.gov. There, you can find helpful articles on credit counseling, repairing your credit history, and more. You can also check out our Credit Center for more information on improving your credit score.
Conclusion
A high credit score is important for getting a loan because it indicates to lenders that you’re a low-risk borrower. This means that you’re more likely to repay your loan on time, which is important to lenders. A high credit score can also help you get a lower interest rate on your loan, which can save you money over the life of the loan. If you have a low credit score, you may still be able to get a loan, but you may have to pay a higher interest rate. This can add up to thousands of dollars over the life of the loan.
