Is your credit score high enough?

11.04.08
By Sarah Beldo

You may have heard it before, but your credit score really does make a difference to your ability to snag the best rate on mortgages, credit cards and loans - particularly in the current economy.

That is the message of a Fox Business article that claims lenders are growing pickier about the credit score they find acceptable - 650 may have been good enough at one time, but now the magic number may be closer to 750.

For example, Marc Cannon of car retailer AutoNation told the news provider that people looking to purchase a new vehicle in the coming months are likely to face "a very tough marketplace" for loans.

He said that last year, a credit score of 650 would be sufficient for obtaining a car loan in about 90 percent of cases. In contrast, only about 60 percent of would-be borrowers with that score would be able to get a loan today, Cannon explained, adding that that proportion is still falling.

Speaking to the Detroit Free Press, consumer advocate John Ulzheimer explained the difference that a car-buyer could see depending on their credit score.

Someone with a score in the 500s could expect to receive an annual percentage rate of around 16 percent. Meanwhile, someone who rated in the 600s may be offered an APR between 9 and 11 percent.

However, someone with a credit score in the mid-700s would probably be able to enjoy an APR of 6.4 percent, Ulzheimer stated.

If you are paying off a loan over the course of several months, that extra interest could really add up.

To avoid paying significantly more over the lifetime of your loan, it is worth looking into how you can give your credit score as much of a boost as possible.

More Personal Finance Articles | News Home | Discuss in our Forum

Credit standards are tightening