What Should My FICO Score Be to Secure a Loan

What Should My FICO Score Be to Secure a Loan
In the world of FICO, in which scores can range from 320 to 850, securing a loan is based on the score as determined by the three credit report agencies. The score also pre-determines what type of interest rate will be applied to said loans.

Do you know what your FICO score is? If not, you may want to check as it will have a direct bearing on whether or not you can secure a loan in the near future.

Before the economic downturn, loans were given out like candy by predatory lenders. Since the banks put a freeze on lending, you may be surprised to find that your FICO score may not be high enough to obtain a loan, and if it does fall within the parameters of acceptance, your interest rates are going to skyrocket.

Here are three loan examples, along with FICO scores, interest rates, and monthly payments. These estimates will be based on the highest FICO score and what is now considered the lowest for each loan type in New York.

Car Loan: $17,000     Low End FICO Score
FICO Score: 720-850     500-589
Interest Rate: 6%     15.755%
Monthly Payment: $517.00   $596.00

15 Year Home Equity Loan: $50,000
FICO Score: 740-850    620-639
Interest Rate: 7.963%    12.221%
Monthly Payment: $477.00   $607.00

30 Year Fixed Mortgage: $300,000
FICO Score: 760-850    500-579
Interest Rate: 5.676%    10.473%
Monthly Payment: $1,737           $2,738

The difference between the high end and low end scores are significant, especially for a 30-year fixed mortgage where a low FICO score costs an additional $1000 per month.

While auto dealerships cannot obtain the funds from the banks to add to their inventories, while banks are not willing to lend money (even though there was a 700 million dollar bailout), and with major companies now laying off thousands of employees – perhaps one’s FICO score has little significance. However, this is an incorrect assumption.

Depending upon when the economy is revived and when the volatility in the stock market subsides, the best recommendation anyone can offer you at this time is to obtain your credit reports, check for errors, and do all you can to increase your FICO score. It is that significant to you and your financial future.

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