Key takeaways
- Your credit score affects three things: whether you’re approved, the interest rate you’re offered and the terms (down payment, loan size, fees).
- On a $350,000, 30-year mortgage, a 780+ FICO Score versus a 620–639 score meant about $167 a month and roughly $60,000 in extra interest at October 2026 average rates.
- For a $30,000, five-year new-car loan, super-prime borrowers averaged 4.41% versus 13.52% for subprime in Q2 2026, a gap of about $8,000 in interest.
- Scores work in tiers. Moving up one band, such as from 690 to 720, often matters more than chasing a perfect 850.
Credit scores affect loan approval and rates more than almost anything else on your application. A higher score tells a lender you’re likely to repay, so you’re more likely to be approved, you’ll be offered a lower interest rate and you’ll get better terms. A lower score doesn’t always mean a denial, but it usually means paying more, sometimes tens of thousands of dollars more over the life of a loan.
This guide explains how lenders actually use your score, the score bands that trigger different prices, what each band costs on a mortgage, car loan and personal loan, and the fastest legitimate ways to move into a better tier before you apply. It’s part of our series on how banks decide loan applications, written with input from team members who have worked on the lending side.
What a lender sees when it pulls your score
A credit score is a three-digit summary of your credit report, built to predict one thing: the odds you’ll fall 90 or more days behind on a debt within the next two years. The two main brands, FICO and VantageScore, both use a 300–850 range.
FICO says its scores are built from five categories, weighted roughly like this for the general population:
- Payment history (35%): on-time payments, late payments, collections, bankruptcies
- Amounts owed (30%): especially how much of your credit card limits you’re using
- Length of credit history (15%): age of your oldest and average accounts
- New credit (10%): recent applications and newly opened accounts
- Credit mix (10%): having both revolving accounts (cards) and installment loans
Lenders don’t all use the same score. Card issuers and personal loan lenders commonly use FICO Score 8 or a VantageScore model. Auto lenders often use industry-specific FICO Auto Scores. Mortgage lenders have traditionally used older “classic” FICO versions, typically pulling all three credit bureaus and using the middle score, and federal housing regulators have been moving Fannie Mae and Freddie Mac toward also accepting VantageScore 4.0. That’s why the score in your banking app may differ from what a lender sees by 20 points or more. It isn’t wrong; it’s a different model or a different bureau’s data.
Three ways your score changes a loan decision
1. Approval
Many lenders set a minimum score, and applications below it are declined automatically before a person ever looks at them. Above the cutoff, the score feeds into a broader decision that also weighs your income, debt-to-income ratio (DTI), employment and collateral. A strong score can offset a slightly high DTI; a weak score can sink an application with excellent income.
2. Interest rate
This is where the money is. Lenders price loans in score bands, and each step down adds to your rate. The cost is easy to underestimate because it’s spread over years of payments.
3. Terms and fees
Your score can also change the maximum loan amount, the required down payment, how long you can borrow, whether you need a cosigner and, on conventional mortgages, the up-front pricing adjustments and private mortgage insurance (PMI) premiums you pay. Two borrowers can get the same advertised rate and still pay very different amounts once fees are included.
Score bands lenders use, and what they mean
There’s no single official scale, but most lenders think in bands similar to these:
| Score range | Common label | What it usually means for borrowing |
|---|---|---|
| 780–850 | Exceptional / super prime | Best advertised rates; easy approvals; little extra gain above ~780 |
| 720–779 | Very good / prime | Near-best pricing on most loans |
| 661–719 | Good / prime | Approved by most lenders; rates noticeably higher than top tier |
| 601–660 | Fair / near prime | Fewer lenders; higher rates and fees; more documentation |
| 500–600 | Poor / subprime | Specialized lenders, secured products, large down payments or cosigners |
| Below 500 | Deep subprime | Very limited options; focus on rebuilding first if you can wait |
Labels and cutoffs vary by lender and loan type. Experian’s auto data, for instance, groups borrowers as super prime (781–850), prime (661–780), near prime (601–660), subprime (501–600) and deep subprime (300–500), while NerdWallet’s personal loan tiers put “excellent” at 720 and up.
What your score costs on real loans
Here’s the gap in dollars, using the most recent published averages. Your own rate will depend on the lender, your income, DTI and the loan details.
Mortgages
Average 30-year fixed rates by FICO Score for a $350,000 loan, from Curinos data published by Experian for October 2026:
| FICO Score | 30-year rate | Monthly principal & interest | Total interest over 30 years |
|---|---|---|---|
| 780–840 | 7.46% | $2,438 | $527,562 |
| 740–759 | 7.62% | $2,476 | $541,387 |
| 700–719 | 7.78% | $2,515 | $555,293 |
| 620–639 | 8.15% | $2,605 | $587,753 |
The difference between the top and bottom rows is about $167 a month and roughly $60,000 in interest if you keep the loan for all 30 years. Most people refinance or sell sooner, but even five years at $167 a month is about $10,000. Plug in your own numbers with our mortgage calculator.
Minimum scores vary by loan type. FHA loans allow scores as low as 580 with 3.5% down, or 500–579 with at least 10% down, though many lenders set higher floors. Fannie Mae dropped its 620 minimum for loans run through its Desktop Underwriter system for loan files created on or after November 16, 2025, but individual lenders can still require 620 or more. Our FHA vs. conventional loan guide compares the rules.
Auto loans
Average rates by credit tier for Q2 2026, from Experian, with the cost of a $30,000 new-car loan over 60 months:
| Tier (score) | New car APR | Used car APR | Monthly payment ($30k new, 60 mo.) | Total interest |
|---|---|---|---|---|
| Super prime (781–850) | 4.41% | 6.29% | $558 | $3,484 |
| Prime (661–780) | 6.15% | 8.81% | $582 | $4,925 |
| Near prime (601–660) | 9.71% | 13.93% | $633 | $7,988 |
| Subprime (501–600) | 13.52% | 19.10% | $691 | $11,436 |
| Deep subprime (300–500) | 16.11% | 21.62% | $731 | $13,878 |
A subprime borrower pays about $133 more a month than a super-prime borrower for the same car, and nearly $8,000 more in interest. For a deeper look, see what credit score you need for a car loan.
Personal loans
NerdWallet’s estimated average APRs by credit tier, updated November 2, 2026, applied to a $10,000 loan over three years:
| Tier | Score | Est. average APR | Monthly payment | Total interest |
|---|---|---|---|---|
| Excellent | 720–850 | 15.03% | $347 | $2,485 |
| Good | 690–719 | 19.60% | $370 | $3,306 |
| Fair | 630–689 | 24.28% | $394 | $4,177 |
| Bad | 300–629 | 30.05% | $425 | $5,292 |
Personal loans are unsecured, so the score gap is sharper: a bad-credit borrower pays more than twice the interest of an excellent-credit borrower on the same $10,000. Compare lenders in our best personal loans guide, or test payments with the loan calculator.
Why the score isn’t the whole story
A good score gets you in the door. It doesn’t guarantee approval. Underwriters still check:
- Debt-to-income ratio. Many personal loan lenders look for a DTI under roughly 36% to 40%, and mortgage limits are often in the 43% to 50% range depending on the program. Check yours with our DTI calculator.
- Income and job stability. Pay stubs, W-2s, tax returns or bank statements must back up what you entered.
- What’s behind the number. Two people with a 700 score can look very different: one has a thin file with two cards, the other has 15 years of perfect mortgage payments. A recent late payment, collection or bankruptcy can matter even when the score looks fine.
- Collateral. For mortgages and auto loans, the value of the home or car and your down payment affect risk and pricing.
From the lending desk: In our team’s experience reviewing loan files, the score decides which pricing bucket you start in, but the credit report decides whether the file sails through. Underwriters scan for things the score can hide: a 30-day late in the last 12 months, a cluster of new accounts opened just before applying, or a card sitting right at its limit. Each one tends to trigger questions or a request for a letter of explanation. If you know something on your report looks odd, a short, factual explanation submitted with the application usually goes over better than waiting to be asked.
How to move up a tier before you apply
Because pricing works in bands, you don’t need perfect credit. You need to clear the next cutoff. These steps tend to work fastest:
- Pay down card balances before the statement date. Utilization is reported from your statement balance. Getting overall usage under 30%, and ideally under 10%, can lift a score within a month or two. Our credit utilization calculator shows how much to pay.
- Pull your reports and dispute errors. Free weekly reports are available at AnnualCreditReport.com. A wrong late payment or an account that isn’t yours can cost you a tier.
- Don’t open new accounts in the months before a big loan. Each hard inquiry typically costs fewer than five points, according to FICO, but new accounts also lower your average age of credit.
- Bring any past-due account current. Ongoing delinquencies hurt more than old, resolved ones.
- Keep old cards open. Closing them shrinks your available credit and can raise utilization.
If your score sits just below a cutoff, say 615 for a lender that prices better at 620 or 680 for a 690 tier, waiting 30 to 60 days while you pay down cards can be worth thousands. If you need the money now, consider a cosigner, a secured loan or a credit union, which often has more flexible underwriting. For more score basics, see our credit score guide.
Rate shopping without hurting your score
Shopping around is one of the best ways to cut your rate, and the scoring models are built to allow it. FICO counts multiple mortgage, auto or student loan inquiries within a short window (14 to 45 days, depending on the score version) as a single inquiry. Many personal loan lenders also offer pre-qualification with a soft pull that doesn’t affect your score at all. Get at least three quotes, compare APRs rather than just rates, and do it within a two-week window to be safe.
Frequently asked questions
What credit score do I need to get approved for a loan?
It depends on the loan. Many personal loan lenders look for about 600 to 660 at minimum, FHA mortgages allow 580 with 3.5% down, and car loans are available at almost any score, though at much higher rates below 600. The best rates usually start around 720 to 780.
How much does one tier of credit score change my interest rate?
On a personal loan, NerdWallet’s November 2026 data shows about 4.5 percentage points between “excellent” (15.03%) and “good” (19.60%). On a mortgage, the gap between neighboring 20-point bands was about 0.04 to 0.12 percentage points in October 2026, which still adds up on a large loan.
Do lenders use FICO or VantageScore?
Most lenders use a version of FICO, but many also use VantageScore, and mortgage rules are shifting to allow VantageScore 4.0 alongside FICO. Expect the score a lender pulls to differ somewhat from the free score in your app.
Is 700 a good credit score for a loan?
Yes. A 700 score qualifies for most loans at reasonable rates. Pushing it above 720 or 740, though, often unlocks noticeably better pricing on personal loans and mortgages.
Can I get a loan with a low credit score?
Often, yes, but expect higher rates, smaller amounts or a requirement for collateral or a cosigner. Be cautious with lenders that promise approval with no credit check; their APRs can be extremely high.
Sources: Experian/Curinos mortgage rates by FICO Score (October 2026); Experian State of the Automotive Finance Market, Q2 2026 (published Sept. 2026); NerdWallet average personal loan rates (updated Nov. 2, 2026); Fannie Mae Selling Guide update (effective Nov. 16, 2025); HUD FHA credit requirements; myFICO score-factor and inquiry guidance. Payment examples calculated by FinInfoBlog. Data as of November 7, 2026. This article is for educational purposes and isn’t financial advice.
Written by Chanchala
Founder & Lead Writer · B.Sc. Mathematics (Honors) · 9 years in banking & lending
Chanchala is the founder and lead writer of FinInfoBlog. She holds a B.Sc. in Mathematics (Honors) and has 9 years of experience in banking and lending. She writes plain-English guides on savings, CDs, loans, credit and personal finance for U.S. readers, and makes sure every example shows the math behind the money decision. How we research and fact-check.