Lenders use your credit score both to decide whether to accept or reject a mortgage application and to set interest rates and fees. Acceptable scores range from 500 to 850. The interest rate difference can be substantial, over 3%, from a low score to a high score. On a $150,000 loan, for example, your monthly payment could be over $300 per month higher if you scored 500 rather than if you scored 850. The average score ranges between 620 and 650. Lenders advertise interest rates based on the lowest rate they offer.
This means that they are assuming that you are the ideal borrower. Do not assume that because a lender advertises a low rate, and also advertises that it will accept borrowers with bad credit, that the low rate applies to the borrower with bad credit.
Unfortunately, an exceptionally high credit score will not get you a rate lower than the bank’s best rate. The score needed for the best rate is generally between 720 and 750, depending on the lender. Any score above that will not lower the rate further. However, a great credit score of 800 or above could minimize a problem, such as insufficient income, and still allow you to get a loan that someone in the same position with a lower credit score could not get.
A benefit of learning your credit score is that you can determine in advance the approximate interest rate you should pay for your loan. You can even take steps to improve your score, if you plan far enough in advance.