Lenders primarily use the Fair Isaac Corporation (FICO) model to determine credit scores. FICO grades...
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Lenders primarily use the Fair Isaac Corporation (FICO) model to determine credit scores. FICO grades consumers on a 300- to 850-point range; a higher score indicates less risk to the
lender. A score of 800 or higher is considered exceptional; 740 to 799 is very good; 670 to 739 is good; 580 to 669 is fair; and 579 or lower is poor.
According to MyFICO.com your credit score can impact interest rates available to you as follows:
FICO score
APR
760850
4.17%
700759
4.392%
680699
4.569%
660679
4.783%
640659
5.213%
620639
5.759%
Using the loan rate available to someone with a FICO credit score of 780, calculate the monthly payment and total paid over the life of a $250,000 30-year fixed-rate mortgage for someone with this credit score.
Now, calculate the monthly payment and total paid using the loan rate available to someone with a FICO credit score of 630.
Calculate the difference in monthly payment and the total interest paid for someone with a very good credit rating (780) with someone who has a low credit rating (630).
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