Have a good score? Push it higher
Why you should improve a great score
If you have a high credit score -- An A in the Vantage system or mid- to high-700s or above in the FICO system, how will improving your score affect you? Experts say there are slight advantages you may secure as you move up from high to very high scores.
- Always get top-tier rates. Most lenders offer rates based on various tiers -- and there's no easy rule of thumb to know where your score will fall in a given lender's scale. "In recent years, I've seen more segmentation between good credit and excellent credit," says Liz Pulliam Weston, a personal finance columnist and author of "Your Credit Score." You may get the best rate if you have a FICO score of 720 or above -- or you may have to score at least 760. The higher your score, the more likely you are to qualify for the best offer.
- Get better perks. Even if you already qualify for a lender's top rate for a home mortgage, you may still be able to swing a better deal, says Watkins. "A lender has a multitude of parameters that can be manipulated to improve or decrease the quality of a loan," he says. "Maybe you can't get a lower rate, but maybe you can qualify for more money or have fewer fees."
- Improve the rate of your home equity line of credit. Because the interest rates on home equity lines of credit are based almost exclusively on your credit score (unlike home mortgages, which take many factors into consideration), you might have more bargaining power if you have a few extra points on your score, says Weston. "A good score might get you a prime rate, but an excellent score might get you a quarter point below prime," she says.
- Build a safety net. You'll spend years building a flawless credit score, but one unexpected problem could wreak havoc on years of good habits. A sudden job loss, a catastrophic accident or a medical emergency could send you into a tailspin. But the higher your score, the more likely you'll escape unscathed. "If you have a score of 830 and you have one delinquency, you probably won't get knocked down to a lower tier, but if you have a score of 780, you might," says Amanda Wellington, a manager at GreenPath Debt Solutions. "A higher score is a way of protecting yourself."
While these advantages are important, that doesn't mean you should focus on your credit score to the exclusion of other important ways to get a financial edge. Williams says that once you've built a good credit score, it may be more advantageous to try to build up a bigger down payment and have as much cash as possible at a closing.
"The other side of building up a good credit history is the ability to accumulate cash and become an investor," she says. "That way, you won't even have to use credit."
Still itching to improve your score? Just keep in mind that, much like climbing Mount Everest, it gets harder the higher up you get. If you're doing everything right already, it's likely that your best ally is time -- just keep doing what you're doing.
"Patience helps," Weston says. "Time will take care of your credit."
|-- Updated: June 16, 2008