Credit scores can affect interest rates on loans. The higher your credit score, the better your chances of getting a loan.
And if you're approved, you can qualify for a lower rate, potentially saving thousands of dollars in interest charges.
A credit score over 760 can get you a 30-year mortgage rate of 5.75%, but it jumps to 7.3% for scores of 620 to 639.
If you are in the good or excellent credit score range, you may find average loan interest rates as low as 13.5%.
However, if you have an average or poor credit score, you will pay a considerably higher average rate on loans.
Lenders use credit scores to determine your creditworthiness and assess the risk of lending you money.
The higher your credit score, the lower the risk you pose to lenders and credit issuers, and the more favorable you look.
This also means that you are more likely to receive a lower interest rate on loans with better terms as well.
Lenders also consider other details such as your income, employment history, and debt-to-income ratio.