Debt Declaration – Bad Credit Help & advice, Debt Settlement Tips

Are there benefits to a higher credit score?

September 25, 2010 by · Leave a Comment 

While the most popular credit score model is the one that has been established by FICO, also known as the Fair Isaac Corporation, that determines the creditworthiness of a person i.e. the likelihood of being able to pay their debts, there has always been speculation about how one’s credit score actually affects their chances of obtaining a mortgage.

And this is why people work so hard in order to obtain an excellent credit score.

However, prepare to be shocked as the fact is that even though you might have a high credit score, it won’t necessarily give you the yield that you might be expecting. The truth is that people with a score of 720 will benefit just as much as those with much higher scores and taking it any higher will not necessarily provide any substantial saving over the life of your mortgage loan.

However, in order to qualify for a mortgage loan, one must have a FICO score between 620 and 720 as there are almost a quarter of U.S adults do not have access to these loans, thanks to their credit ratings being below the magic number of 620.

And while mortgage loans were offered at 4.3 percent for those who had a credit rating of 720 and above, the best rate offered for those with a credit score rating of 620 and 639 was about 4.9 percent. Simply put, for an increase in 20 credit points, the mortgage rate dropped by 0.19 percent which is not much as the interest rates are very low at the moment.

Finally, why there is very little difference between the two is because those with credit scores barely need credit, and the banks will make very little from them as opposed to those who have manageable scores.

Comments are closed.