I Have a Great Credit Score

I've talked a lot about the need for a good credit score and how to get one in the past. For details, see these posts:

• Nine Steps to a Great Credit Score -- Save Yourself Thousands of Dollars

• Why Even Dave Ramsey Needs to Consider His Credit Score

• What's the Perfect Credit Score?

• Protect Your Credit Score by Limiting Credit Inquiries

• Two Keys to a Great Credit Score

I have wanted/needed to check my credit score for some time now but hadn't gotten around to it. But as we get closer to buying a home (I'll update you if/when we get to that point), I got us pre-approved for a loan so that we could make a stronger offer to the seller (more on this later too.) Anyway, I called my banker to get pre-approved and in the process he pulled a credit report on me. I asked him what my credit score was. He had three listed with the average of them being 799.

So where does 799 put me? According to my banker, it puts me in line for the best rate on a mortgage. This agrees with what Get Rich Slowly says on the issue. 799 puts me well above the average credit score of 679 for my state, in the 87th percentile of all credit scores (one point more and I would have been in the highest group), among the best credit scores and well above the median credit score of 723.

And to round out the information, here's a bit more perspective on credit scores:

FICO scores range from around 300 to about 850. Approximately 1 percent of the population with established credit has credit scores below 500 and another 13 percent score from 500 to 600. By far the largest group, 28 percent, is in the 750 to 799 scoring range. About 11 percent of the population is in that rarified area above 800 points. The median credit score (the point where 50 percent rank higher and 50 percent rank lower) is 723.

And this piece answers what a "good" credit score is:

When lenders talk about "your score," they usually mean the FICO® score developed by Fair Isaac Corporation. It is today's most commonly used scoring system. FICO scores range from 300-850, and most people score in the 600s and 700s (higher FICO scores are better). Lenders buy your FICO score from three national credit reporting agencies (also called credit bureaus): Equifax, Experian and TransUnion.

In the eyes of most lenders, FICO credit scores above 700 are very good and a sign of good financial health. FICO scores below 600 indicate high risk to lenders and could lead lenders to charge you much higher rates or turn down your credit application.

When my banker reviewed my credit, had my income number, and knew that I wanted to buy a house I could afford, he pre-approved me over the phone and faxed an approval letter to my real estate agent within 15 minutes. I guess keeping your financial ducks in a row does have some benefits -- it sure made getting approved very easy.

BTW, for those wondering about me borrowing to buy a home (which is a switch since I haven't had a mortgage for a decade), I'll detail what I'm doing, how it will all work, etc. if and when we actually do make a bid on a house and it gets accepted.

Comments

[Will]

Unless you're Warren Buffett, you need a good credit score. I remember reading somewhere that his credit score isn't that great (not that it's bad). But what does he care? It's not like he's on the market for a mortgage :)

But for us mere mortals, a good score not only makes things easier, but it also makes them cheaper : credit card rates, mortgage rates, insurance premiums... A good score can even help you get a job over a similarly qualified candidate whose score is in the dumpster...

[Mike]

I had the same situation a few months ago when I started mortgage shopping: a credit score of 795, good income, no debt, and buying a home I can actually afford (22% of my monthly gross, not including my live-in girlfriend). Preapproval came in minutes and the broker was very happy to be working with such an 'easy' client.

Just like you said, it makes life a lot easier when you're financially stable.

[Heidi]

Congrats on having great credit! It's a goal everyone should strive for (unless they can afford to live an 100% cash-based existence).

"Good" credit isn't what it used to be. Our bank is only purchasing pools of HELOCs where the borrowers have a minimum FICO of 720 (our cutoff used to be 680). In this tightening credit enviroment, people with scores between 680 - 740 may see their interest rates rise as a result of the sub-prime mess.

[Allen]

I also had a similar situation just recently. I wanted to refinance my mortgage since some of the rates were lower than they were when I first applied. The bank pulled my credit score and was approved in minutes. The hard part was signing all the paperworks.

[Kevin]

I'm actually surprised you weren't over 800, FMF. Not that 799 is anything to scoff at. When we applied for our mortgage back in 2005, both the wife and I were over 800 and we both still had car payments then. Now we don't, I wonder if that impacted things at all?

[Brent]

Too bad scores over 725 (or something around that) doesn't make a difference when getting a mortgage. I have a high credit score too but was told it didnt matter if you were over a score in the lower 700's

[TC]

I am in a position of wanting to improve my credit score with very few options on how. (FWIW, I have a bankruptcy from 6 years ago.)

I have one credit card on which I charge less than 25% a month and pay it off monthly (very low limit). this bumped me 20 points immediately, but I can't see that it will help me in the future. (Only hurt, if I default, which I will not do.

I was thinking about doing this: taking my stimulus and putting it in savings, then going to the bank and asking for a loan secured by the savings. The loan funds then go in my high-yield savings account. Each month, I would pay at least double the monthly payment, and perhaps as much as 4 or more times the monthly payment on the loan until paid off.

Is this ridiculous? I am not in the market for a car at the moment, so I won't have that as another type of credit usage. I know better than to get a store credit card. I own my house, so I can't prove my credit worthiness by paying my mortgage well.

I just want another type of credit usage to prove that I have learned the error of my ways. Is this even worthy of consideration?

[FMF]

TC --

I'll post your questions on the blog in a week or so. Check back for responses.

[LC]

My average credit score was also 799, and this was at age 26 after never having a credit card.

My husband has had excellent credit for a long time, but I have never had a credit card, so we were worried when we went to get a mortgage about how my lack of credit history would give me a low score and "pull down" the amount that we could be approved for. But there apparently was no problem. I just can't understand why college students get credit cards with the excuse that they need to build their credit score. You can definitely build a good score without them.

FMF, I am curious why you still plan to get another mortgage. Why don't you take the equity in your current home to pay for it? Or are you upgrading?

[FMF]

LC --

Upgrading.

[Dave]

I have a credit score of 840. What percentage of the population has an 840 or higher? Could I have the highest score in the nation?

[Marilyn]

NO. I also have a credit score of 840. Means we pay our bills and know how and when to spend our money.

[GS]

799 is damn near a perfect score in my book. Takes a lot of work, and in this financial time its gotta be pretty beneficial. I'm working on improving mine now after some hiccups.

[CEO]

I just checked my credit score and I'm a bit shocked at how low it is at 730. I have owned and sold property in the last 5 years; all payments were made on time. I've had a car loan, again with all payments made on time. I currently have an american express card which I pay off in full each month. I've never had any negative reports on my credit. Basically I have zero debt and a very good history of paying everything on time. Why would my score be so low? Does this even make sense?

[FMF]

CEO --

I'll post your question in a couple weeks as a "Help a Reader" post and see what FMF readers have to say. Stay tuned.

[Garen]

I agree 799 is pretty much a perfect credit score, which shouldn't be any problem in terms of getting approved for a new house. Remember that opening a new card and leaving it open with a high credit line is a good way to bump up your score even more. Never close out cards you don't use, just don't use them :)

[NMB]

I am a new mortgage broker, and boy have I learned the benefit of having a good credit score. Luckily mine is pretty high as well, but I have already worked with clients who have pretty low scores. When you know just how much that number means about a person's spending and income, it really does change how you view them as a reliable lendee.