How your Credit Score Affects your Interest Rates
Updated: Mar 8, 2020
Credit scores can be anywhere from 300-850 on the FICO scoring model which is the most commonly used model to evaluate your overall credit history. Lenders look at your credit score for certain patterns of behavior that are good or bad.
Common terms you may have previously heard include: super prime, prime, and subprime borrowers. Each category has the potential to affect your interest rates which will in turn affect your monthly payment by hundreds of dollars to thousands of dollars or more per month. Not knowing what category you fall into can hurt you financially and make most lenders see you as a more risky borrower.
FICO and Vantage Score Prime vs Subprime graph
When it comes to auto loans according to Experian, borrowers with credit scores of 660 or less, had an average loan interest rate in 3rd quarter 2018 ranged from 7.52% to 14.41% for new vehicles, and 10.34% to 18.98% for used cars. You may end up paying $60 or more per month on a subprime loan than a prime loan when comparing interest rates between the two.
Also, home mortgage loan interest rates are not as high as auto loan interest rates. However 1% can cost you up to $200 a month extra on the average home loan. Your score shouldn't be taken lightly and you should do everything you can to raise your score. Becoming a prime borrower is where most people usually want to be to get some of the most favorable interest rates when shopping around for a new home.
Credit Freedom Experts
Helping our clients fix their credit is what we are here to do. We also go over your credit history with you and walk you through the process to raise your score. We go over all your bad habits and credit history, and then provide the tools to create new positive credit building habits that will save you money and fulfill some of your financial goals.
If you need any help our experts are here to help you. contact us at 321-400-5260, or sign up for a FREE Credit Report Consultation.