You just want to know what a good credit score is.  Probably because you are looking into obtaining a mortgage, or maybe an auto loan.  Did you know credit scores are used in other areas outside of obtaining financing?  Cell phone companies, insurance companies, apartments and sometimes even employers will check your credit to determine you as a risk.  So…..what is a good score, right?

720 is a good score.  So is 680.  Sometimes even 640 is a good score.  It is all relative.  These scores are scores used by mortgage companies and credit reporting agencies.  Some companies have developed their own credit scoring model that delivers an entirely different type of score put in the form of numbers or even letters.  I used to work for a cell phone carrier and when we ran credit for potential customers we would get responses of A, A-, B, B-, C and so on.  Based on the result we would increase the deposit that was required to obtain a cell phone.  Eventually the deposit was so high that many would opt out of getting a cell phone plan and just use the pre-paid phones that are a lot more popular now than when I was selling cell phones.

Anyway, I got off track there for a moment.  A good score is relative because someone might be interested in what is good enough to get a loan, while another person wants to know what the score needs to be to get the best interest rate.  So here are the answers:

What is Good Enough?

Good enough has been a moving target in the mortgage business because of the multiple companies making restrictions on the credit scores.  There are mortgage investors, mortgage insurance companies, and mortgage broker companies.  All of these companies may have individual restrictions on the credit scores they are willing to lend on and all of them must be followed.  Typically, the minimum credit score allowed for A-Paper mortgage financing is around 620.  There are some exceptions.  For example, I recently assisted a customer who had a 545 credit score and I was able to obtain A-Paper mortgage financing.  This is certainly an exception though.

More than the credit score, the actual items on your credit is the most important when determining what is good enough for mortgage financing.  FHA mortgages do not look at the credit score, but rather look at the actual trade lines on the credit report.  For more details on the requirements for FHA financing check out Mortgage Loan Requirements – FHA.

What Score Gets You the Best Rate?

Just like determining what score is good enough, the score that gets you the best rate is also a moving target.  This target moves more often than the minimum score to get a loan.  Here is an example to give you some idea of what impact your score (all other factors being equal) has on the interest rates:

  • 620 = 7.250%
  • 640 = 7.000%
  • 660 = 6.625%
  • 680 = 6.000%
  • 700 = 5.625%
  • 720 = 5.375%
  • 740 = 5.375%
  • 760 = 5.375%
  • 780 = 5.375%
  • 800 = 5.375%
  • 850 = 5.375%

As you can see, when the score was above about 720, the rate stayed consistent, up to the highest score I have seen of 850.

It is All Relative

A good credit score is relative upon what you are looking for and I hope this has given you some insight into what a good score is.  If you have any further questions, please email me and I would be happy to reply to your email in the form of a post.

Lending a Hand,

Scott Wynn