It's smart to get an idea of the average credit score required to get approved for credit so you'll be prepared. If you don't quite meet the requirements, you can try to build your score up. However, the actual credit score you need to get credit ultimately depends on the policies of the individual lenders you contact.
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The average credit score needed to get a mortgage loan varies according to the type of loan you're seeking. As of 2011, the average is about 620 for a home loan at average rates. The average may be a bit higher for conventional loans compared with FHA (Federal Housing Administration) loans. But if you want the very best rates on a mortgage you should have a score that exceeds 760.
The average credit score for a used car loan is about 684 while the average for a new car loan is about 775 (estimates as of 2009). Car financing companies commonly rank borrowers on a tier rating scale. Tier 1 includes borrowers with the best scores (720 and above), which result in the best rates. Tiers 2 and 3 scores align more with the average customer at about 670 to 719. Tier 4 and higher customers (669 and lower) commonly get subprime rates. These are the rates most commonly associated with bad-credit car loan advertisements.
About Unsecured Debt
Unsecured credit (like credit cards and personal loans) is riskier for a lender than mortgage and car loans (secured debt) because the lender doesn't have a physical asset to claim in case of default. So the average score required is commonly a bit higher than the averages for secured debt. If you're trying to get business credit, you must also consider the business credit score. A commercial lender commonly requires a score of about 75 out of the maximum 100 for approval.
Keep in mind that even if you have a decent credit score that meets the average, lenders can deny a credit application for other reasons. Creditors look at the entire "picture" regarding your financial profile when making a decision for a new account. For instance, if you have a large amount of debt already, even if you make regular on time payments, that could cause denial of credit.
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- Home Buying Institute; "Definition of a Good Credit Score in 2011"; Brandon Cornett; Dec. 12, 10
- Bankrate; "How credit scores affect mortgage rates"; Elizabeth Razzi
- Creditnet: Average credit score for car loans increases
- Edmunds: How To Get an Auto Loan During the Credit Crunch
- Entrepreneur; "The ABCs of Business Credit"; David Gass; March 25, 2005