Next-Tier Borrowers
Although the difference between a perfect and a good enough FICO score isn’t that great, the difference between a good enough score and a poor one can be huge. If your score ranged from 620 to 674 on that day then you could expect to pay much more in interest which is 6.42 percent. This translates to a monthly payment of $1,254. That’s $86 more than a borrower with a top score would be paying month after month. In addition to being required to pay a higher rate you would be offered fewer loan choices. It could mean being offered only adjustable-rate loans even though you might prefer fixed. You also might be stuck with a nasty prepayment penalty if you try to refinance to a better loan within two or three years.
The next tier consists of those with a credit score ranging from 700 to 719. If your scores were in this range on that day then the lenders would quote you a slightly higher interest rate which is 5.88 percent. This of course would boost the payment but not by much. You would pay $1,184 each month which is just $16 more than a borrower with the very best score. You still would be offered a broad assortment of loan types.