FICO scores typically range from 300 to 850 with most mortgage lenders considering 680 and above to be "A Paper", meaning a low risk borrower who qualifies for the best rates on the rate sheet. While 680 is usually the benchmark some mortgage lenders provide an additional price break in rate or fees for FICO scores at 720 and above (think of this as a bonus).
It is also generally accepted that FICO scores at or below 620 place you in the "subprime market" where the cost of credit (fees) and the rates of credit are considerably higher than "A Paper" rates. Above 620 and below 680 is often referred to as "Alt-A or B Paper".
In a previous report you learned that not all of the bureaus generate the same score, so most lenders rely on the "middle score" of the three for underwriting purposes. If your middle score is at or above 720 you don't need to spend time worrying how to improve your score as there will be no tangible benefit since you already qualify for the lowest rates available.
However if your score is below 680 it does behoove you to improve your score so that you can access the lowest interest rates as well.
Considering how much consumer debt the average American family is carrying, and how much the average mortgage debt is, it is not hard to understand that the difference between these rates over time adds up to tens of thousands and even hundreds of thousands of dollars in additional interest payments. The sooner you can improve your credit the sooner you can re-negotiate your rates with the credit card companies and refinance your mortgage to a lower fixed rate.
Here is the breakdown of scores across the U.S. as reported by Fair Isaac:
o 300-499 2%
o 500-549 5%
o 550-599 8%
o 600-649 12%
o 650-699 15%
o 700-749 18%
o 750-799 27%
o 800-850 13%
You might find it surprising to find that the largest single percentage of Americans are scoring between 750-799, and that another 33% find themselves between 650 and 749.
Since the rate of late payments and default is much higher among people with 620 than for people with scores of 660 and above, borrowers who have lower credit scores are charged higher fees and rates to make up for the others in their group who are late or never pay.
The bottom line$%: You want to shoot for a middle score of at least 680 to be able to qualify for the best rates on credit cards, car loans and mortgage loans.
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