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.Ideal Financing Options
Healthy credit is important since most mortgages have a minimum credit score requirement.
Consider:
- 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.
