Did you know that having an 800 credit score or more can help you qualify for some of the best rates available?
The average American's credit score is 711, which is still good and results in good mortgage rates, but having a higher score is always better.
Your credit score reflects how well you manage your debts. A high credit score indicates that you are financially responsible, while a low credit score indicates that you have made some financial mistakes.
So, what exactly can you get with an 800-credit score? Let’s take a look.
Is your Mortgage Rate Based on Your Credit Score?
Lenders base your mortgage rate on a variety of factors, but your credit score is the most important. The higher your credit score, the less likely they'll think you are to default on your, and thus, will offer you a lower rate.
Likewise, when you have a lower credit score, lenders often charge a higher interest rate to compensate for the increased risk of default. A study done by Credible found that a consumer with a 699-credit score pays an average of 0.4% higher rate than a borrower with a 760-credit score. That’s the equivalent of $15,000 in interest more on a $200,000 mortgage.
What is the Mortgage Rates for an 800 Credit Score?
You're probably wondering what mortgage rates are available for someone with an 800-credit score, right? Well, there isn't quite a cut-and-dry answer because every lender charges different rates.
Lenders usually look at various factors when determining your interest rate, such as debt-to-income ratio, employment history, down payment amount, and most importantly, credit score. If all of these factors are 'good' meaning you have only a few debts, your employment is stable and you make a large down payment plus you have an 800-credit score, your chances of securing the best rate possible are very high.
How To Achieve An 800 Credit Score
Now that you know the benefits of an 800-credit score, you probably want to know how to achieve it, right?
Every situation is different, but here are some tried and true strategies to help you achieve the highest credit score possible. These strategies work if you already have established credit. If you’re still building credit, you’ll want to focus on building a solid credit history first. Here are some things you can do If you already have credit.
Pay your bills on time
Your payment history is the largest part of your credit score, making up 35% of it. Since mortgage lenders figure mortgage rates by credit score, you’ll want to pay close attention to this section.
Credit bureaus consider a payment late when it’s over 30 days past the due date. Your credit score takes a big hit for one 30-day late payment. If you don’t bring it current within 60-days, you’ll get hit again. The hits continue in 30-day increments until you bring it current, or the creditor writes your debt off as bad debt which hurts your credit score even further.
Pay close attention to your due dates and pay your bills by them. If you can’t, contact your creditor right away to work out a plan versus just ignoring it and hurting your credit.
Lower your credit utilization
Your credit utilization compares your outstanding debt to your credit lines. They refer to it as a percentage.
To calculate your credit utilization rate, divide your outstanding credit (your credit card bill) to your total credit line. Try keeping it as low as possible. For average credit, it should be at 30% or less, but if you want mortgage rates for an 800-credit score, keep your credit utilization rate at 10% or less.
To achieve this, keep your credit utilization at $100 for every $1,000 in the credit line. This doesn’t mean you can’t use your credit cards. If you do, pay the balance off before the due date so the full balance doesn’t get reported to the credit bureaus.
Monitor your credit report
Everyone gets free access to their credit report here. Since the pandemic, they’ve allowed consumers to check their credit reports weekly, rather than just once a year. You can access the credit reports for all three credit bureaus here, checking all at once or alternating between the three bureaus.
This isn’t your credit score, but if you clean up your credit history, your credit score will improve. When you pull your reports, look for the following:
- Late payments
- High credit utilization rates
- Too many inquiries
- Inaccurate information
If you notice any of these issues, bring your accounts current, pay your debts down, stop applying for new credit, and report any inaccurate information to the reporting bureau.
Keep old accounts
Don’t be tempted to close old accounts. Some accounts naturally close once you pay them off, such as car loans. But credit cards and certain other credit accounts remain open. Keep them that way. The older your credit history is, the more it helps your credit score.
Carry a good credit mix
A part of your credit score depends on your credit mix. A consumer with all revolving debt (credit cards), will have a lower credit score than someone with a mixture of credit cards and installment debt (auto loans, personal loans, student loans, etc.).
With an 800-credit score, the mortgage rate you’ll get will likely be one of the most competitive. If your credit score isn’t quite 800, but it’s close and your other compensating factors are great, you’ll still be in the running for the best interest rates possible.
Lenders assign your mortgage rate based on your credit score while looking at the big picture. Prove you are at low risk of default, and you could save thousands of dollars on your mortgage long-term.