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Why Credit Scores Matter

Credit scores, by definition are a numerical expression based on various factors of a person’s credit profile that indicates their level of creditworthiness to potential financial institutions.  These credit scores are designed to identify the potential risk of a consumer to a financial institution, therefor quantifying their likelihood of ability and willingness to pay off the debt they are seeking to incur.   Your credit score will determine whether or not you are able to get a loan.  Some employers and even landlords will do what is called a “soft pull” to see a quick snapshot of someone’s credit score to determine whether or not they may hire someone or approve them for renting a property.

Credit scores range between 350 on the low end to a “perfect” score of 850.  The higher the credit score the better interest rate the consumer is likely to get.  Lower interest rates mean lower monthly payments, and less interest being paid overall.  Even saving as little .5% on an interest rate over the course of a 30 year mortgage will literally save you thousands of dollars over the life of the loan.  For most lenders, having what they refer to as a “good” credit score, of at least 720 points will yield you the best interest rate possible.  Conversely, having a low credit score will not only limit your ability (if not prevent) to secure a loan, but will cost you money in higher interest rates.

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Your credit score is one instance where less is not more.  The higher your credit score, the better off you will be all the way around.

  • One out of every 8 applicants will be denied a home mortgage due to a low credit score. 
  • Only one out of 1,300 people in the United States have a credit score above 800
  • Most lenders will approve a home loan with a minimum credit score of 680.