February 3, 2009

Having a good score will save you money, but having an excellent credit score will really pay off.

What is Considered an Excellent Credit Score?

As the current credit crunch has taken effect, the idea of not only what is a good credit score has changed, but so has an excellent one.  An excellent credit score is actually defined by the lender you are using.  For example, Eloan states an excellent credit score is one above 730.   MyFICO shows having a 760 or above will get you the best rate on a mortgage.

The best way to put it is the lender decides what the best interests are and the level of credit score you need to have to get them.

How Much Money will you Really Save?

That is a great question.  I think it is best to just look at the MyFICO website.  On their front page is a chart that shows how much money you will save on any combination of mortgage depending on your FICO score.  Comparing a good credit score to an excellent one one on a 30 year fixed $300,000 mortgage, the excellent score will save $14,400 over the life of the loan.

Not too much you think.  Well, consider this across all the loans in your life.  Include credit cards, auto loans and any other type of lending you do.  It really will add up.

Getting an Excellent Credit Score

If you are attempting to get an excellent credit score you will be at the top 10% to 15% of consumers.   The average American is somewhere around the 700 mark.  This isn’t bad but getting an excellent one will take effort.  This is a day to day practice.  Consider when you buy something at Target and the store offers you a store credit card for a 10% discount on your current purchase.  This 10% at the time would be great, but this is an hard inquiry on your credit report.  This can be the enemy of a excellent credit score.  They will prevent you from getting those few points you need to get there.

Also, carrying low balances is a day to day practices.  You need to make a conscience effect daily to control spending.  If you have even the idea that you can carry a large purchase for the next few months, you could slow your way to an excellent credit score.

People who have an excellent credit score know how it is calculated.  Furthermore, they consider thier actions and the effect it will have on thier credit worthiness.  Often the idea of having an excellent credit score is more rewarding then the 10% discount or the large purchase.