680 used to be the credit score consumers were told to aspire to. In this good credit range, a 680 was solid enough to access the great loan and mortgage rates, get you approval for most credit cards, and open up your financial options. With a 680, you could be confidant that you could borrow credit as needed and at good mortgage rates, but that was yesterday. The credit crunch has drastically changed lending standards, and you don’t need an expert on credit to tell you that. If you’ve tried to apply for a loan, credit card, or mortgage in the past two years and were rejected, you know how tight access to credit is compared to pre-recession days when lenders played fast and loose with money.
By today’s standards, you need a 720 just to qualify for a mortgage. For credit cards, a good credit score 720 will give you greater options in terms of low rate credit cards, 0% APR offers, and rewards cards, but some Credit Karma consumers report being rejected for a credit card even with a 720 score. In terms of personal or business loans, lenders are far more scrutinizing of both your credit score and credit report. Derogatory marks, even with a great credit score, will compromise your chances with lenders. You may boast a 720 credit score, but if your credit report has blemishes like a past delinquency, record of any late payment, old bankruptcy or foreclosure, you will be perceived as credit-risky.
The Credit Score You Need
“Consumers looking for the best rates should focus on building a credit score of 750 or higher,” recommends Kenneth Lin, CEO of Credit Karma. A 680 was yesterday’s standard, a 720 will give you access to credit, but a 750 credit score is the three-digit ticket to the best options, rates, and terms offered by lenders. 750 is the bottom of the excellent credit score range, which reaches as high as 850. You don’t need an 850 or even an 800 credit score to get the best loans and rates. Typically, lenders will place you in a bracket according to your score, which means that once you hit the 750 mark, you qualify for the same, premium options as a consumer with an 800.
The good news is that this means you don’t need to strive for credit perfection to get the low rates and premium offers you want. Bad news is that since standards are rigid and you are thrown into brackets, a 749 may not cut it. While to you, a 749 seems like one inconsequential point away from 750, a lender will lump you in with the good credit score range that starts as low as the mid-600s. “With the new regulatory rules and current economic conditions, lenders are no longer looking to take on the risks associated with lower credit score,” Lin states. Lending standards are tight because lenders are extremely careful to avoid any potential losses.
The difference in the rates offered to those below 750 and those above 750 translates into several percentage points’ difference in rates, which adds up to thousands of dollars over the life of a loan or mortgage, and the difference between approval and rejection for a credit card.
What Should You Do At Your Credit Score Range
Poor Credit – If you are in the poor credit score range in the low 500s, you need to establish your credit history and build, build, BUILD good credit with a secured card. You can get a 100-150 point jump in 3-6 months with the right credit behavior.
Fair Credit – If you are in the fair credit score range in the low 600s, open up new credit lines and manage it wisely to get your credit score moving. Your credit score can improve as significantly as poor credit consumers, so manage your new credit lines responsibly and you’ll see your score jump.
Good Credit - When in the good credit score range in the low 700s, options will open up. You’re at the starting line for the new credit standard, however, your options may not be premium rates and it isn’t guaranteed approval. It’s also harder to add points to your score at this level, so you must work harder at it by developing a mix of credit cards and maintaining flawless credit history.
Excellent Credit – For those who are excellent credit score consumers in the high 700s, congratulations! You have jumped the necessary credit score hoops and you’ll receive the lowest rates possible and premium options. However, be careful not to lose your credit standing. The higher you credit score, the harder you fall, so remain vigilant of your credit behavior because even one late payment will crash your score and land you in less-than-favorable position with lenders.
Credit Karma is the consumer’s advocate for credit! We are a completely free credit management service that helps nearly 2 million users realize the everyday cost savings of having a good credit score by providing free credit scores and a wealth of tools to help consumers put their credit to work for better overall financial health. Please visit our website at www.CreditKarma.com.
Published or updated October 27, 2010.