What’s the minimum credit score needed to get the best rates on most types of loans?
There’s a lot of debate as to where that threshold lies. Is a credit score of 780 good enough to get the best mortgage rates, credit card offers, and loan rates? Here are three compelling reasons why it might be the magic line of demarcation between very good and stellar credit.
Reason #1: The best mortgage rates
It used to be a 740 would qualify you for the best mortgage rates. Well, that all changed after the Great Recession in very big way. The top rung of scores has been raised, unfortunately.
Currently, the minimum credit score to get the best mortgage rates is typically in the range of 750-760, at least with most lenders. However, a 740 to 750 FICO may still qualify you for the best rates with some lenders (as the saying goes, your mileage may vary).But when it comes to jumbo mortgages, a 760 probably isn’t going to fetch you the lowest APR. A mortgage broker from Georgia told me that in order to get the best rate on a jumbo loan, you typically need a 780 credit score along with a hefty down payment of up to 25%. Conclusion? For lower mortgage amounts, a 760 will do just fine. But if you’re talking across the board – all mortgage sizes – then a 780 or higher FICO score will be required.
Reason #2: The best loan rates
When it comes to car loans, the truth is that you can get approved even with less impressive scores… you’ve seen the commercials where the dealer promises to qualify anyone. But if you have bad score, you’re going to pay through the roof with the sky high APR!
The minimum score to get the very best auto loan rates tends to be 720 or 740… which obviously is far below the 780 benchmark. But with many other types of loans, the minimum is much higher.
For example, if you want to get an unsecured loan through your bank or credit union, a 720 will probably qualify you but not at the lowest rates. The minimum score needed to get the best deal will be comparable to a credit card (which of course, is also unsecured).
With home equity lines of credit (HELOCs) you will also need a stellar credit score in today’s real estate market. Sure, you can probably still get approved with a lower score, but for the best rates it’s comparable to mortgages… count on a 760 to 780 credit score (jumbo HELOCs will usually require the latter).
Conclusion? Once again, a 780 FICO score seems to be that magic number if you want the lowest rates, regardless of the loan type/size.
Reason #3: The very best credit card offers
You can have a credit score of 720 to 750 and still get approved for many great cards. However if you want a score that will qualify you for anything, then you’re going need to go higher. I’ve seen many credit card websites claim a 760 is good enough for anything, but I can tell you – for a fact – that advice is incorrect. I have heard from many long time forum members with scores of around 760 (real FICOs, not FAKOs) and their application still got denied for some cards. In order to have the best chance at approval –and– getting the best interest rate, a score of 780 and up seems to be the cut-off point. However let me be clear – you could have even higher than that and still get denied or approved with second-tier rates. This is because factors like debt to credit and credit history are also taken into account. So a certain number will never be a guarantee, but I can tell you that 780 certainly does the trick better than a 760. But obviously there are no guarantees and every issuer is different.
So if 780 is good enough, why strive for higher?
It’s kind of like your checking account. As long as you have enough money in the account to cover your outstanding checks/debits, your balance is “good enough” whether you have $1 or $10,000 above the owed amount, right? But wouldn’t you rest easier knowing that your cushion was bigger?
Even though a 780 is sufficient, I recommend aiming for a bit of a buffer. I say this for two reasons:
- If you have exactly a 780 and your score drops a few points, suddenly you are no longer at that threshold. However if you have say, a 795 or 800, you still have a few points to spare without jeopardizing your creditworthiness. As with many situations in life, having a margin of safety is a good thing.
- Your FICO score will vary between the 3 credit bureaus. Why? Because the information they have can differ, causing your score with one bureau to be different from another. That means just because you have a 780 with say, Experian, don’t take for granted that Equifax and TransUnion are the same.
How to get a 780 credit score?
It’s really not that difficult if you have no negative items on your credit report. If you have a bankruptcy or major delinquency on file, then it will take a few years to achieve. Either way, reaching this number isn’t that difficult if you know what you’re doing.
Step One: Understand the various scoring models
Everything I’ve mentioned above is in reference to FICO, however most websites sell non-FICO scores. So first and foremost, you need to understand the difference between a FICO and VantageScore, as well as an Experian PLUS Score and a FICO. There are countless other formulas also, but those are the two most common non-FICO versions and reading about them will help you understand how the game works.
Step Two: Check your credit reports
Before you can address a problem, you need to identify it. By checking you credit reports, you will be able to see your strengths and weaknesses, including any derogatory items that might be on there by mistake or without your knowledge. Check out AnnualCreditReport.com.
Step Three: Know the right steps to take
What actions should be taken (or not taken) to achieve a credit score of 780? Well like I said, aim higher and read this guide about how to get an 800 FICO score. Many have crossed the 800 threshold using just credit cards so if you only have a couple right now, you may want to consider adding a few more to your credit-building arsenal. The more accounts you have, if managed responsibly, the better.
Step Four: Begin monitoring your score
While it’s possible to get a free credit report each year from all three of the major bureaus, it’s not so simple to get a free FICO score. However, there are cards out there (like the Barclay Rewards MasterCard and the Discover it card) that will provide your credit score on the billing statement each month. This can be a great way to see the results of your credit efforts over time.
Written or last updated April 14, 2015