If your credit score stands at 671, you fall right in the middle of the spectrum. According to Experian's data from 2021, the average American consumer possesses a FICO Score of 714, and a score within the range of 670 to 739 is generally considered a good credit score.
Most lenders regard a 671 credit score as an average score, reflecting that you typically meet your bill payment obligations on time. In this article, we will delve deeper into what your 671 credit score implies when it comes to applying for loans and how you can work towards improving your score.
What does a 671 credit score signify?
As previously mentioned, a 671 credit score falls within the range typically classified as good credit. Lenders often consider scores in this range when approving loans. Nevertheless, it's important to note that a score in this range does not qualify as "very good" or "exceptional" credit, and therefore, it generally won't secure the best interest rates or loan terms offered by lenders.
Borrowers with a 671 credit score are considered to be relatively low-risk when it comes to repaying borrowed funds. Statistical default rates range from 4.6% for consumers in the 660-679 FICO Score range to 1.9% for those in the 720-739 range. While your score does not indicate bad credit, many borrowers in the good credit score range might have late payments, a limited credit history, or adverse credit information, such as a loan default from several years ago. Consequently, lenders tend to exercise caution.
Can I acquire a credit card with a 671 credit score?
In short, yes, you should be able to obtain a standard, non-secured credit card with a FICO Score within the good credit score range. However, there are a couple of significant caveats.
First, you are unlikely to qualify for some of the best credit card offers in the market. To secure the best rewards credit cards, balance transfer offers, and the most favorable 0% APR offers, lenders may require excellent credit scores significantly higher than yours. Additionally, your credit limit might not be as high as that of consumers with better scores.
Second, it's essential to understand that your credit score is just one aspect of the credit card approval process. Lenders also take your other outstanding debts and employment situation into account. In fact, even consumers in the elite credit tiers may face rejection if their other debts are deemed excessively high.
Can I obtain an auto loan with a 671 credit score?
Certainly, you can qualify for an auto loan with a 671 credit score, assuming that your income justifies it. However, it's crucial to recognize that your credit score can significantly influence the interest rate you receive, particularly in auto lending.
As of November 2022, MyFICO data indicates that the average APR on a 60-month new auto loan for someone with a FICO Score of 720 or higher is 5.64%. For a score in the 690-719 range, it's 6.83%, and for a borrower with a score in the 660-689 tier, the average APR is 9.19%. To put this in perspective, on a $40,000 new car loan, an individual with a 730 credit score would pay approximately $4,000 less in interest than a borrower with a 680, despite both scores falling into the "good credit" category.
It's worth mentioning that interest rates can vary considerably among lenders, even for borrowers with the same credit score. So, when buying a home or a car, it's crucial to shop around for the best loan terms. The FICO credit score model is designed to encourage rate shopping. Multiple inquiries on your credit reports for the same type of loan within a short period (typically two weeks) are counted as a single inquiry for scoring purposes. Therefore, applying with multiple lenders won't harm your credit score.
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Can I secure a mortgage with a 671 credit score?
Yes, you should have no trouble qualifying for a mortgage with your 671 credit score, provided that your income, employment situation, and assets meet the necessary requirements. Conforming mortgages, which are conventional loans meeting Fannie Mae or Freddie Mac standards, typically require a score of 620. FHA mortgages with low down payments require a score of 580. Your score comfortably surpasses both of these thresholds.
However, it's essential to keep a few things in mind. First, you are unlikely to qualify for a lender's best mortgage rates, as those are typically reserved for borrowers with very good or exceptional credit scores. Nevertheless, with a 671 credit score, you should qualify for rates that are in line with national averages.
Also, the lower your credit score, the more robust your other qualifications are generally expected to be. For example, based on Fannie Mae's latest lending standards, if you have a credit score above 720, you can secure a mortgage with a debt-to-income ratio (DTI) as high as 45% with a standard 20% down payment. If your score falls below 720, your DTI is capped at 36%.
Can I obtain a personal loan with a 671 credit score?
You can secure a personal loan with a 671 credit score, but not every lender may grant approval. Some lenders may require credit scores well into the 700s for consideration. However, depending on the lender, you may be eligible for a personal loan with competitive terms.
Personal loans powered by Upstart are primarily designed for borrowers who may not possess top-tier credit but are still considered creditworthy based on non-traditional factors. If you're in the market for a personal loan, it's worth exploring the loan offers from Upstart.
Take your 671 credit score with a grain of salt As previously mentioned, there's no universal definition of a "good" credit score, and different lenders employ credit scores to varying degrees in their lending decisions. Furthermore, no metric, including the widely-used FICO Score, is a perfect predictor of consumer behavior. In fact, a study conducted in 2021 by professors at the University of Pittsburgh revealed that traditional credit scoring misclassified default risk for around 30% of consumers, particularly lower-income and younger individuals.
Upstart, in particular, aims to look beyond a borrower's credit score and consider their complete financial and life situation to provide qualified borrowers with less-than-ideal credit scores the access to borrowing they need and deserve.
How can I elevate my good credit score to greatness?
With a 671 credit score, you are comfortably above the realm of poor credit but still in the middle tier. If you aim to enhance your credit score, there are some strategic steps you can take. While each consumer's situation is unique, here are a few considerations if your goal is to improve your credit score:
Maintain a low credit utilization rate. Although the common advice is to use less than 30% of your available credit, consumers with FICO Scores of 795 or higher typically use just 7% of their available credit.
Only apply for new credit when necessary. Hard credit inquiries made within the past 12 months can have an adverse impact on your score, and recently opened accounts can also affect it.
Allow your credit history to age. The length of your credit history contributes 15% to your FICO score, so one of the best ways to build your credit report and achieve a higher
