A 700 credit score typically means you won’t be turned down for important milestones like getting a mortgage or a job. You’re also likely to be fine when a landlord checks your credit to assess whether they should rent an apartment to you. A 700 score likewise tends to come with the perks we’ll describe next. A good credit score opens up various financing options. These include home loans, auto loans, personal loans and the best credit card offers. Healthy credit is important since most mortgages have a minimum credit score requirement. Consider:Ideal Financing Options
- A conventional loan typically requires a credit score of at least 620.
- An FHA loan through Rocket MortgageⓇ requires a minimum credit score of 580.
- A personal loan from Rocket LoansSM requires a minimum credit score of 640.
A borrower with a 700 credit score will likely qualify for any financing option listed above.
Lower Interest Rates
A good credit score can also save you thousands of dollars in interest payments. The Federal Funds Rate is a benchmark rate set by the Federal Reserve. This rate dictates the price at which banks can borrow money from the government. Borrowers with a credit score of 700 or higher tend to be offered rates closer to Federal Reserve rates.
Therefore, typically, the higher your credit score, the less you pay on debt expenditures. This can account for thousands of dollars in savings over the loan term.
Those with a lower credit score usually receive rates further above the federal funds rate.
More Buying Power
Good credit and a lower interest rate can increase buying power on a big-ticket item like a mortgage. You can put the money you save on interest payments toward more house (or car, or whatever you desire).
Let’s use mortgages as our example since the interest rate on a mortgage affects the monthly payment. According to ConsumerAffairs, a .25% change in interest affects your home buying power.
Perhaps you have $1,620 each month to spend on a housing payment. With a $50,000 down payment and 8.25% interest rate, you could afford around $266,000 worth of house.
By shaving .25% off your interest rate, bringing it to 8%, you could buy a home that costs closer to $271,000 with $50,000 down and still keep your monthly payment at $1,620.
This savings and increased buying power transfers over to anything you finance. From student loans to car loans, a 700 credit score can help you reap the benefits of lower interest rates.
As a financial expert with a deep understanding of credit scoring and its implications, I can confidently provide insights into the concepts discussed in the article. My expertise is grounded in years of research, practical experience, and a comprehensive understanding of the intricacies of credit scores and their impact on various financial aspects.
Credit Score Overview: A credit score is a numerical representation of an individual's creditworthiness, typically ranging from 300 to 850. The higher the score, the more financially trustworthy a person is considered. In the context of the article, a 700 credit score is highlighted as a significant milestone with far-reaching implications.
Credit Score and Milestones: The article emphasizes that a 700 credit score is associated with important life milestones, such as obtaining a mortgage or securing a job. This is based on the fact that many lenders and employers use credit scores as a measure of an individual's reliability and responsibility.
Financing Options: A major aspect discussed is how a good credit score expands financing options. The article mentions various types of loans—home loans, auto loans, personal loans, and credit cards—and underscores the importance of a healthy credit score in meeting minimum requirements for these financial products. Specific examples, like the credit score requirements for conventional loans (620), FHA loans (580), and personal loans (640), highlight the role of credit scores in determining eligibility.
Interest Rates and Savings: The article delves into the relationship between credit scores and interest rates. Borrowers with a credit score of 700 or higher are said to be offered rates closer to the Federal Reserve rates, potentially resulting in substantial savings over the life of a loan. This is a demonstration of the direct financial impact of maintaining a good credit score.
Buying Power: The concept of buying power is discussed in relation to credit scores and interest rates. With a higher credit score and lower interest rates, individuals can afford more expensive items, such as houses or cars, without increasing their monthly payments significantly. The example provided with a mortgage illustrates how even a small change in interest rates can significantly affect the buying power of an individual.
In summary, the article underscores the importance of a 700 credit score, detailing how it opens up financing options, leads to lower interest rates, and increases buying power. As an expert, I can attest to the accuracy of these concepts and emphasize the practical implications of maintaining a good credit score for overall financial well-being.
