If your credit score is 750 or above, congratulations are in order. Your score is considered “very good” and can help you access loans that offer the most favorable borrowing terms. When it comes to getting a mortgage, a score of 750 or higher may impress lenders—but your credit score is not the only thing that impacts your approval and what your interest rate will be.
Interest rates are based on many factors, including where the home is located and the type of mortgage you apply for. A good credit score will definitely help you get a more favorable rate, but it takes more than that to lock in the best terms.
Read on to learn what your 750 credit score might be able to get you, and what else you can bring to the table to help you get a low mortgage rate.
Is 750 a Good Credit Score?
In the scoring models used by most mortgage lenders, credit scores range from 300 to 850. This score range is further divided into tiers, which can help you understand how lenders and others may view your score. FICO® Scores☉, the most commonly used score among lenders, break into the following five ranges:
- 300 to 579 is considered “very poor”
- 580 to 669 is considered “fair”
- 670 to 739 is considered “good”
- 740 to 799 is considered “very good”
- 800 to 850 is considered “exceptional”
A score of 750 falls in the very good range and shows that you’ve historically done a good job managing your debt as agreed. When considering you for a loan, lenders use your credit score to help gauge how likely it is you’ll pay back your debt on time. A higher credit score tends to predict a higher likelihood that they’ll recoup their debt without issue.
Average Mortgage Interest Rate With a 750 Credit Score
Since credit scores serve as evidence that a person has managed debt well in the past, consumers with higher scores typically qualify for better interest rates and credit products. Credit scores are not the only factor in determining the interest rate you’ll pay on a mortgage, but they do play a big role. The following is an estimation of the annual percentage rate (APR) you could get on a 30-year, $300,000 mortgage with the following scores:
Source: myFICO. Based on national average rates as of August 2020.
What Additional Factors Affect Your Mortgage Interest Rate
Here’s what else can impact your mortgage rate:
One of the most important factors to consider is the type of loan you want. Mortgages come in many shapes and sizes, and rates can vary based on the type of loan you get:
- Conventional: Conventional loans are not backed by government programs and are issued by banks, credit unions and mortgage lenders. If you have high credit scores and can put down at least a 20% down payment, you may get the lowest interest rate using a conventional loan.
- Government-insured: Federally insured loans are backed by the U.S. government and include FHA loans, VA loans and USDA loans. Borrowers who may have difficulty qualifying for a conventional loan may be eligible for an FHA or USDA loan. VA loans are geared to U.S. service members and their surviving spouses, and typically offer lower interest rates and more favorable terms than conventional loans for those who qualify.
- Fixed-rate: When a loan has a fixed rate, it means you’ll pay the same interest rate over the life of the loan. This can give you peace of mind knowing that you won’t have to worry about an increased monthly payment even if economic conditions or federal lending rates change.
- Adjustable-rate: The interest rate on an adjustable-rate loan is subject to change, which has upsides and downsides. You’ll typically have a lower rate when you begin making loan payments than you’d have with a fixed-rate loan, but your rate can climb later on and potentially cause you some financial instability if it increases your payment amount.
Your down payment—how much cash you pay toward the initial home purchase—can also alter your interest rate. A bigger down payment can help you secure a lower interest rate because it reduces the amount of the loan and, in turn, reduces risk to the lender.
Loan term and size
Though a 30-year mortgage is the most popular, some lenders offer mortgage terms of 20, 15 or 10 years as well. Shorter-term loans typically have lower interest rates, but the monthly payments will be higher.
Where you live, or plan to, plays a factor in mortgage rates. Research your preferred market, and others you might consider, to compare rates.
When shopping for a mortgage, consider all the above factors. Choosing a different type of loan may end up saving you money, as could making a larger down payment. If you are a first-time homebuyer and don’t have a lot of disposable cash, you might opt for a 30-year FHA that allows you to get a home with what you can afford now, even if you have to pay a slightly higher rate to do so.
Be Prepared and Know Your Credit Before You Apply
Before you begin looking at homes, consider asking a lender to preapprove you for a loan. This will tell you how big of a loan you qualify for, which will be a major factor in your home search. Mortgage preapproval won’t affect your credit scores.
When getting a preapproval, lenders will check your credit and other aspects of your finances to see what you can afford. If you don’t already know what your credit score is, it’s a good idea to check it on your own prior to talking to a lender.
Lenders will look through your report carefully, with an eye out for a record of on-time payments and whether you have any derogatory marks on your reports. Your credit utilization ratio will also be a key factor, as it tells the lender how much of your available credit you’re currently using.
Having a preapproval isn’t always required, but many sellers will not accept offers from buyers who have not been preapproved. In a busy real estate market, you could hurt your chances for getting the house you desire if you don’t have one.
If you check your credit and find that your score isn’t where you want it to be, take some time to improve it before talking to a lender.
How to Improve Your Credit Score Before Applying for a Mortgage
There are several ways you can improve credit relatively quickly. Taking a few simple steps prior to applying for a mortgage could help increase your chances of approval and may help you lock in a favorable low interest rate.
- Pay down existing debt. Lenders will look at your debt payments as a ratio of your income when calculating how much you can borrow. This is called your DTI, or debt to income ratio, and paying down debts now can help improve this ratio for when you apply for a mortgage. Also, paying down revolving debts—like credit card balances—can help improve your credit utilization ratio and help you boost your score in a short period of time.
- Keep paying bills on time. Your payment history is the most important aspect of your credit score. Lenders view late and missed payments as signs you may not manage your finances well, which can affect their comfort level when it comes to taking you on as a borrower.
- Dispute any inaccurate information. Mistakes and fraud can happen, so if you see information you believe to be inaccurate on your credit report, make sure to file a dispute with one or all of the three main credit bureaus (Experian, TransUnion and Equifax) as soon as possible.
- Don’t apply for new credit. During the mortgage approval process, even small changes to your credit can disrupt the underwriting process and disqualify you for a loan. Any applications for new credit will appear in your credit reports, and could cause a lender to change their mind. Creditors will pull your credit reports right before issuing you a mortgage (even if they’ve done it before for a preapproval), so it’s important to make sure not to make drastic changes leading up to your closing date.
If you aren’t sure where your credit stands, get a free copy of your credit report and scores from Experian to understand what lenders will see when they consider your application and what areas of improvement you may have.