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How Important is a Good Credit Score
By plrprousers | June 3, 2009
Amazingly enough, someone’s life can be drastically affected by three numbers. Here is a small course on what credit scores are and what consequences they can bring.
You sit down to look at your credit report for the first time. If you’re scores are above 720, congratulations! You have excellent credit; stop worrying. If you’re scores are not above 700, no problem—let’s get to work. Always remember the fact that the national average score is around 676 according to the Gallup Organization. If you’re scores are below 400, 500, or 600, there’s surely room for improvement and only one way to go—up!
If you do not understand the numbers I have mentioned or you have no idea what they mean, don’t fret—I’ll explain. Credit scores range from 350 to 850. All three of the credit bureaus—Equifax, Experian, and Transunion—offer FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At Equifax, the FICO is known as the Beacon credit score; at TransUnion, it’s called Empirica; and at Experian, it’s called the Experian/Fair, Isaac Risk Model.
If you’re credit scores are above 720 you will be able to get the best interest rates available as you have excellent credit. As your credit scores fall down, the interest rate you’ll receive for a home loan will rise: this is known as tiered pricing. The more of a risk the lender takes on you, the higher your interest rate will be. In addition, all moneylenders have their own break points between tiers. This means that one moneylender may raise the interest rate if a score drops below 700, while another lender won’t give a higher rate until the score drops below 690.
In summing up, you should do everything in your power to maintain good credit scores, and be sure to shop around and do your homework when looking for a home loan because all moneylender are not created equal. I think you’ve already gleaned the moral of the article but just in case you haven’t, here it is: Good credit scores save lots and lots of money, and be sure to choose a lender wisely to get the best rate for your scores.
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