What is a good credit score?

Know the facts to get the best deal on your loan or mortgage.

When we go into the market for a new credit facility, loan or mortgage, it is in our interest to be equipped with the most information we can. One of the most important concepts to understand is that of a good credit score. We need to look at our credit profile from the perspective of the lender and see what they would consider to be a good credit score. Armed with this knowledge we can go out and negotiate the best possible deal for our borrowing needs.

Once your reach above 720, you have a good credit score in the lenderís eyes. You are considered low risk and you will be able to get favorable interest rates on borrowed funds. What many people do not realize is that a lender will most likely clump almost everyone above 720 into one group. In other words, a person with an excellent credit score of say 790 will not get much lower rates than a person with a good credit score of say 730. As far as the lender is concerned, their credit score requirement of their lending criteria is more than satisfied once you have a good enough credit score. From their perspective any reduced risk for them for lending to a credit score of 790 opposed to 730 is not worth reducing interest rates significantly. Note however that apart from the criteria for a good credit score, the lender would have other requirements such as total income and job security that they would take into account.

Nonetheless, when you approach a lender with a score of 720 or higher, you should go in with the goal of receiving their best available rates. It is not the job of your account manager or loan office to offer you their lowest rates; in fact they want to make as much money on behalf of the bank as possible. This is where your knowledge and understanding of the industry can give you that negotiating power. Understand that at this stage you have a good credit score from the lenders eyes. Understand that at this stage they will not distinguish to any significant level between you and someone with a credit score higher than you. As long as you adequately satisfy and lending requirement outside the realm of your credit profile, there should be no reason why you donít get their best rates.

Ironically, the average credit score in America hovers around the 720 mark. So the average American should be able to secure the best available rates. As far as the credit score is concerned, the lenders would generally have a legitimate reason to raise rates under 700. At this point your score is below average and theoretically you pose a greater risk. The lower the score goes from here, the higher a rate they would charge.

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