A few points can cost you thousands of dollars over the lifetime of a loan, because lenders set interest rates depending on which credit scoring bracket you fall into. Credit scoring brackets or tiers are not always the same across all industries or even within them. Finding out typical scoring brackets gives you a goal to aim for when improving your credit.
Identification
Credit scoring brackets are charts lenders reference when setting the interest rate on your loan. A lender, for instance, might consider all scores above 770 the top tier and give anyone in this range the lowest rate. The next bracket would be 769 to 740 and receive the second highest rate.
Considerations
While lenders set their own credit scoring brackets, lenders usually consider anything above 720 to 760 the top tier because getting higher than this is nearly impossible, according to MSN MoneyCentral. Anything less than 620 typically falls into the worst bracket of scores -- known as "subprime."
Benefits
You will reap benefits even if your rate improves by a minuscule amount. On average, for example, raising a score in the range of 700 to 719 to 720 and above saves about $20 per month on a $250,000 loan. This, however, equates to a savings of $7,200 over the life of a 30-year loan, according to Kiplinger.
Tip
Edmunds recommends asking your loan officer about their credit scoring bracket and how it correlates to their interest rates in writing. Having a visual representation of credit score matrices can make comparison shopping easier for you.
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