Average Credit Score in U.S. Does Not Qualify for Best Mortgage Rates

Home Buying News - February 26, 2009 -- Most people in the U.S. would not qualify for the best interest rates being offered by lenders today, mainly because of their credit scores. Here's how to improve your score and put yourself into the "favorable minority."

According to Experian's National Score Index website, the average credit score in the United States is currently around 690 points. This is their own proprietary data by the way, so you could probably find different estimates from other sources. I would estimate that the average score is even lower than that.

But this article is not about the law averages. It's about mortgage rates, and what it takes to qualify for the best rates a lender has to offer. And regardless of what data source you reference, one thing is for certain -- the average consumer in the United States will not qualify for a home loan with the best interest rates.

What It Takes to Get the Best Rates

Every mortgage lender has its own standards for qualification. So the credit score needed to get the best rates will vary from one lender to the next. The "rule of thumb" for mortgage qualification has gone up over the last couple of years, thanks to the now infamous subprime mortgage crisis.

These days, you'll probably need a credit score of 720 or higher if you want to qualify for the best interest rates on a home loan. That doesn't mean you need a score of 720 to get qualified for the loan, but if you want to get the best rates you'll need excellent credit.



Where do you stand in terms of a credit score? The only way to find out is to request your scores from all three of the credit reporting agencies (Experian, TransUnion and Equifax). Mortgage lenders may take the average of your three scores or the middle number when considering you for a loan. It's possible for the scores to be different, so you need to get all three of them to find out where you stand.

How to Improve Your Credit Score

If you find out that your credit score is below the 720 range needed to get the best interest rates, you should focus on improving your score. After all, mortgage rates in 2009 will be at their lowest point in decades. By taking advantage of this, you could save a lot of money on your monthly payments.

You can find hundreds of articles on this website to help you boost your score. If you want to do it as quickly as possible, you might want to start with this video tutorial: How to Raise Your Credit Score Fast in 2009