How To Get A Loan With Excellent Credit (Credit Score Above 740)

Getting an auto loan with excellent credit

With excellent credit, you’ll have absolutely no trouble getting an auto loan. You can apply with any bank, credit union, or dealership-related lender, and get approved with the best rates available. Or, you can check out Fiona, a loan matching service that will find you the best rates – so it’s really just more of a convenience for folks with excellent credit.

As a personal strategy, it’s best to apply with your own bank or credit union. Credit unions in particular tend to offer the lowest auto loan rates since they’re member-owned. At a minimum, apply for an auto loan with a credit union, then bring the loan approval to the car dealership. See if they’ll make you an even better offer. They may not be able to, but it’s always worth the effort.

Your excellent credit will not only ensure a speedy approval, but you’ll also be able to get the best terms. That may include 100% financing – if that’s what you choose – and a loan term as long or short as you prefer.

You’ll definitely be in a preferred position when it comes to interest rates. Take a look at our auto loan calculator to see what kind of rate you can get.

Getting a mortgage with excellent credit

There may be no single loan type where having excellent credit can save you more money. Mortgage lenders will provide loans for people with credit scores as low as the 580 to 620 range. But the higher your credit score, the lower your interest rate will be.

And for what it’s worth, there really isn’t any significant difference in the interest rate you pay from one company to another. They all sell their loans under the same for programs – FHA, VA, Fannie Mae, and Freddie Mac. Your credit score will have a much bigger impact on the rate than the lender you apply with.

Reali Loans (formerly Lenda) is a great way to test the waters before you start shopping around. You can get pre-approval for a mortgage by providing pay stubs and downpayment information. You’ll be provided quotes from multiple lenders, and you can use the information to choose the best rate. Most importantly, the pre-qualification process doesn’t affect your credit score.

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Check out our mortgage calculator to see what kind of rate you can get.

The hidden benefit of excellent credit with mortgages

If you know much about mortgages, you’ve probably at least heard of private mortgage insurance, or PMI. But here’s a not so surprising fact – PMI premiums are also based on your credit score. In fact, the impact is even greater than it is with mortgage rates themselves, at least on a monthly basis.

PMI is required on conventional mortgages any time you make a down payment of less than 20% of a purchase, or you have less than 20% equity for a refinance. It’s not inexpensive.

Let’s work an example based on two credit scores.

For this example, we’re going to be referring to the MGIC Rate Card for PMI premiums. MGIC is one of the largest PMI providers in the nation.

Let’s say you’re purchasing a home for $400,000. You’re going to make a down payment of 5% – $20,000 – and taking a 30-year fixed rate mortgage for $380,000. Put another way, you’ll be taking a mortgage equal to 95% of the purchase price. And that means PMI will be required.

If you have average credit, 680 to 699, the annual premium will be 1.08% with 30% coverage. That will result in an annual premium of $4,104, which will translate into a monthly premium of $342. That amount will be added to your basic mortgage payment, plus your property taxes and homeowner’s insurance.

By contrast, if your credit score is at least 760, the annual premium rate on the same loan drops to 0.41%. On a $380,000 mortgage, the annual premium is $1,558, or about $130 per month.

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Adding up all the mortgage savings from excellent credit

Because of your excellent credit, you’ll save $212 per month, or $2,544 per year, just on your PMI premiums. When you consider you’ll be paying those premiums for several years, that can really add up. Over 10 years, that’s a difference of $25,440.

When you add the PMI savings to the money you’ll be saving from your lower interest rate on the mortgage itself, it adds up to tens of thousands of dollars.

This is why excellent credit is especially important when you’re applying for a mortgage, and particularly when you’re making a minimum down payment.

What’s the definition of excellent credit?

As was the case in our articles on fair and good credit (see below), we’re going to rely on the Experian definition of excellent credit.

Experian breaks excellent credit into two categories – very good and exceptional. But either qualifies as excellent with the vast majority of lenders.

Very good includes a credit score range between 740 and 799. 18.2% of the population fall into this category. Exceptional includes a credit score range between 800 and 850 (the maximum credit score possible). This group represents 19.9% of the population.

Whether your credit score comes under Experian’s definition of very good or exceptional, doesn’t make a whole lot of difference. Most lenders will consider a credit score of better than 740, and without any significant derogatory credit, to be excellent. You’ll be eligible for the best loan programs and pricing possible in virtually every lending capacity.

Let’s look at what kinds of financing is available if you have excellent credit.

Common document requirements for a loan application when you have excellent credit

Below is a list of documentation commonly required for loans of all types. Exactly which items you’ll be required to furnish will depend on the lender and the kind of loan you’re applying for. However, if you have excellent credit, lenders will often relax the documentation requirements. For example, if you have preferred customer status at a bank, they may not require any documentation at all.

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Nonetheless, be prepared to furnish any and all of the following:

  • Your most recent pay stub and W-2(s) to document your income.
  • Evidence of Social Security or pension income (award letter or 1099).
  • Contact information for your employer (the lender will verify your employment directly).
  • Copies of completed income tax returns for the past two years, if you’re self-employed or work on commission.
  • Make, model and value of your car; VIN number if you’re applying for an auto loan.
  • If you’re paying or receiving child support or alimony, list the amount you’re paying or receiving.
  • Bank or brokerage statements, or even retirement account statements.

How to maintain your excellent credit

If you have a credit score of 740 or higher, you probably don’t need much advice on credit. But since people do sometimes fall from excellent credit grace, let’s spend a bit of time talking about what to do – or not do – to maintain your high credit level.

Here are some do’s and don’ts:

  • Do continue to make all your payments on time, including utility bills and medical payments.
  • Don’t apply for new credit too frequently – new loans can drop your credit score.
  • Do monitor your credit regularly. If errors appear, correct them immediately with creditors, and make sure they report the corrections to all three major credit bureaus.
  • Don’t cosign loans. Even though you aren’t the primary borrower, if that person makes a late payment, it will be reflected on your credit report. If they default, that will also show up on your credit report.
  • Do keep your credit card balances low. Even if you have a perfect payment history, your credit score can be negatively affected by an excessive credit utilization ratio.