The amount and age of a loan can affect your credit scores. But it's not only the loan itself that affects your credit scores. How you actually manage the loan also affects your credit scores. It's important to make payments on time and avoid late payments or missing payments altogether.
The higher the interest rate, the longer you may be paying off the loan — and if you can't afford those rates in the long term, you risk falling behind on payments and damaging your credit score.
The FICO® Score algorithm will recognize that you're rate shopping, or comparing rates across multiple loans within the same category, if you submit applications within a specific time frame. That period is 14 days for older FICO® Score versions and 45 days for newer versions.
Depending on the state of your credit, loans can either help or hurt your credit scores. New and existing loans can affect your credit in several ways: They help you build credit if you successfully make payments. They hurt your credit if you pay late or default on loans.
Payment History Is the Most Important Factor of Your Credit Score. Payment history accounts for 35% of your FICO® Score. Four other factors that go into your credit score calculation make up the remaining 65%.
Paying off the loan early can put you in a situation where you must pay a prepayment penalty, potentially undoing any money you'd save on interest, and it can also impact your credit history.
Depending on where you're starting from, It can take several years or more to build an 800 credit score. You need to have a few years of only positive payment history and a good mix of credit accounts showing you have experience managing different types of credit cards and loans.
With a longer period of time to repay your loan, your monthly payments are usually lower than if you borrowed the same amount over a shorter term. But, again, keep in mind that with a long-term loan, you'll likely be paying a greater amount overall because you'll paying interest throughout the longer life of the loan.
A long-term loan means you'll pay less in principal each month because the total amount you borrowed is broken down over more months, so it can be tempting to choose one with the longest term available. But a longer term also results in more interest charges over the life of that loan.
In general, the longer your loan term, the more interest you will pay. Loans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms.
A 750 credit score generally falls into the “excellent” range, which shows lenders that you're a very dependable borrower. People with credit scores within this range tend to qualify for loans and secure the best mortgage rates. A 750 credit score could help you: Qualify for a mortgage.
Your FICO® Score falls within a range, from 740 to 799, that may be considered Very Good. A 740 FICO® Score is above the average credit score. Borrowers with scores in the Very Good range typically qualify for lenders' better interest rates and product offers.
The best-known range of FICO scores is 300 to 850. Anything above 670 is generally considered to be good. FICO also offers industry-specific FICO scores, such as for credit cards or auto loans, which can range from 250 to 900.
If your credit score is a 625 or higher, and you meet other requirements, you should not have any problem getting a mortgage. Credit scores in the 620-680 range are generally considered fair credit. There are many mortgage lenders that offer loan programs to borrowers with credit scores in the 500s.
A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
If you have been using credit for only six months or a year, it's unrealistic to expect a score in the high 700s. Still, it is possible to establish excellent credit — a score of 800 or higher, for example — in your 20s.
A FICO® Score of 730 falls within a span of scores, from 670 to 739, that are categorized as Good. The average U.S. FICO® Score, 711, falls within the Good range.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
The closer you are to your credit limit, the more paying off credit cards improves your score because it reduces your credit utilization rate. Similarly, the more you pay down on your balance, the more you impact your credit score.
Your FICO® Score falls within a range, from 740 to 799, that may be considered Very Good. A 787 FICO® Score is above the average credit score. Borrowers with scores in the Very Good range typically qualify for lenders' better interest rates and product offers.