When underwriting mortgage files, banks adjust your interest rate based on risk tiers. A difference of 50 to 100 points on your credit report can save you thousands of dollars over the lifetime of a 30-year loan.
FICO Score Tiers and Interest Rates
Under conventional guidelines, interest rate pricing shifts across designated credit score tiers:
- 740 - 850 (Excellent): Qualifies for the lowest interest rates. Lenders charge zero Loan-Level Price Adjustments (LLPAs).
- 680 - 739 (Good): Standard market pricing. Rates may be 0.25% to 0.50% higher than the top tier.
- 620 - 679 (Fair): Higher interest rates. Borrowers often face PMI surcharges and higher lender fees.
- Under 620 (Poor): Conventional approval is highly challenging. Buyers must look to government FHA files.
Credit Tier Payment Estimator
$1,517
The Cost of a Lower Tier over 30 Years
Consider a $300,000 home loan. A borrower with a 760 score may qualify for a 6.5% interest rate, resulting in a $1,896 monthly payment. A borrower with a 630 score may be charged 7.5%, raising the monthly payment to $2,097. Over 30 years, the lower credit score costs an additional $72,000 in interest charges.
🔗 SILO Links: Model payments using our Mortgage Payment Calculator or check your limits with our Mortgage Affordability Calculator.