The High Cost of Low Credit Scores

(From smartmoney.com) Record-low interest rates are useless to the millions of borrowers with less-than-perfect credit scores. They end up paying a high premium when applying for everything from credit cards to home mortgages. Despite the Federal Reserve’s efforts to encourage more lending and home buying, millions of people have been shut out from borrowing, according to a report today by The Wall Street Journal. Consumers with high credit scores accounted for nearly 90% of all new mortgages last year.

This comes at a time when the number of Americans with poor credit is growing. Most lenders check borrowers’ FICO credit score, which ranges from 300 to 850, to determine whether to approve them for financing and at what terms. In general, borrowers with a FICO below 720 will end up with higher interest rates and could have a harder time getting a loan. Today, nearly a third of consumers have a FICO score in the 550 to 699 range – the highest since 2006, according to April data from FICO. And nearly half of consumers have a FICO score that’s lower than 700.

Read more here: The High Cost of Low Credit Scores