With my credit score, what interest rates?

Don TaylorDear Dr. Don,
I understand that the higher your credit score, the lower your interest rate. My question: Is there a standard scale for interest rates based on your credit score?

-- Jamison Rates-Jump

Credit score gauge © iStock

Dear Jamison,
First, thank you for asking a good question aimed at ensuring you get the best deals on financial transactions.

As it turns out, there's no universal standard. But, a lender determines what kind of risk premium it will add to a loan based on your credit history and the information in your loan application. You can't take a lender's advertised interest rate for its best qualified borrowers and tack on a set premium because you're a C credit instead of an A credit.

Credit scores and your rates

As one example, does show how mortgage rates vary by different credit score ranges. As I write this, the site shows that the national average annual percentage rate, or APR, on a 30-year fixed-rate mortgage for a person with a FICO score between 760 and 850 is 3.77%. For a person with a credit score between 620 and 639, the national average APR is 5.36%. The difference in interest rates shows why it's so important to get your credit history on track before applying for a loan.

You can check your credit score for free at myBankrate.

Credit histories and time

A credit score is determined by the information in your credit report. Most negative information, with the exception of a Chapter 7 bankruptcy filing, drops off your credit report after seven years. A Chapter 7 filing stays on your credit report for 10 years. Also, information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.

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Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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