Earlier this Spring we collectively hit a financial milestone. FICO, the company that computes the credit scores most used by lenders, reported that for the first time ever the average score rose to 700.
Good news? Sure. But clearly not great news. FICO credit scores can range from 300 to 850. The higher your score, the better financial shape you will be in, as it helps you qualify for the best loan terms and credit card deals. A score of 700 is certainly better than 660 or 690. But I want you to aim for a score of at least 750.
That’s the level where you will be a candidate for the best deals. For instance, the interest rate on a 30-year fixed rate mortgage recently was about 3.6% for someone with a 750+ FICO score, 3.8% with a FICO score of 700 and 4% with a FICO score between 680 and 700. That might sound like small differences, but it adds up. On a $300,000 mortgage your monthly costs could be at least $60 less with a top-tier FICO score. That’s $720 a year in savings. I bet you could think of plenty of ways to save, or wisely spend that annual savings.
A 750+ FICO score also makes it more likely you can qualify for balance transfer credit card deal, or a car loan with the lowest possible interest rate.