Interest rates fluctuate based on credit score

Most consumers know that their good or bad credit directly affects their ability to be approved for things like car loans, mortgages and credit cards. Yet many don’t realize how just a few points can greatly affect the rates that they are quoted.

Recent findings by Zillow, an online mortgage database, show that rates can fluctuate wildly based on just a few points in credit score. For most borrowers, the magic numbers to target are 620 and 720.

It used to be that anything below 600 was considered bad credit, but tighter lending standards in the wake of the recession mean that most borrowers aren’t getting offers on mortgages if their score is below 620, according to the company. Once above 620, rates will change every 20 points – so a score of 639 might get offered a 4.9 percent rate, while a 640 will get a 4.73 – which could mean a savings of thousands of dollars over a long-term period.

Borrowers with good credit should know that although they can improve their scores above 720, they’ll already be getting the best rates no matter what they’re applying for, so beyond giving themselves a bit of a cushion, it won’t actually affect their ability to save.

Buyers with bad credit should know that they may be pre-approved for a car loan. By applying online, they can see exactly what kinds of rates are available.