For a three-digit number that’s generated by a semi-secret formula, credit scores can have an enormous impact on our lives. An excellent credit score like 780 is like a golden ticket that can open all kinds of financial doors, including lower mortgage rates and eligibility for popular credit cards.
On the flip side, if you have a low score, it can be harder to borrow money. It can even impact your job hunt or ability to rent an apartment. If you’re not sure what your score is, you can get it from credit monitoring services online. Some credit cards also help you track your score, as do a couple of the top budgeting apps.
Here’s why it’s worth shooting for a credit score of over 780.
1. You can save tens of thousands of dollars on your mortgage
A FICO® Score of 780 is classified as “very good.” It tells lenders that you are a low-risk borrower, which can translate into better terms when you apply for a loan. And if you are applying for a mortgage, even a slightly lower mortgage rate can translate into significant savings.
According to The Mortgage Reports, in mid-2024:
- A score of 760 or more could get you a mortgage rate of 6.98%.
- A score of 660 to 679 could get you a rate of 7.59%.
- A score of 620 to 639 could get you a rate of 8.57%.
Let’s say you are buying a $400,000 property with a down payment of $100,000. The table below shows how much difference a percent — or even a fraction of a percent — makes across a 30-year mortgage term.
| Credit Score | Mortgage Rate | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 760 or more | 6.98% | $1,992 | $417,077 |
| 660 to 679 | 7.59% | $2,116 | $461,819 |
| 620 to 639 | 8.57% | $2,322 | $535,790 |
Data source: Author’s calculations, based on 30-year fixed home loan for $300,000.
2. You can access the best credit cards
There are lots of different types of credit cards out there, with a mix of fees, benefits, and rates. But you’ll need a high credit score to qualify for the ones with perks that will make your friends jealous.
- High rewards or cash back rates: Look for the card — or cards — that match your habits. That might be 5 points per $1 on, say, travel. Or 6% back on groceries. Or 2% rewards on your everyday spending. Great rewards can quickly become valuable.
- Outstanding perks: Some cards give you credits for things like gym memberships, streaming services, ride-hailing, and more. Others might offer airport lounge access or travel insurance.
- Lower interest rates: Credit card APRs only matter if you carry a balance on your card. Even so, a high score could lower your APR. Even better? If you owe money on your card, you could qualify for a 0% introductory APR balance transfer card. In some scenarios, this can be a good way to pay down your balance.
3. You could lower your car insurance premiums
Credit scores certainly make a difference if you want to borrow money. But that’s not the only way your score can impact your life. All kinds of people might check your credit, including potential employers or landlords.
Insurance companies use their own version of a credit score, known as a credit-based insurance score. This uses a lot of the same information that credit bureaus use to calculate your credit score, but it’s differently weighted.
There are a lot of other factors that impact your insurance premiums. But, if you have a high credit score, there’s a good chance you’ll access lower rates. According to research by The Motley Fool Ascent, last year, drivers with exceptional credit paid almost $2,200 less a year than those with very poor credit.
It’s worth noting that rules vary from state to state. For example, insurers in California, Hawaii, Massachusetts, and Michigan are not allowed to use credit scores to calculate premiums.
How to improve your credit score
Around 28% of Americans have a FICO® Score of 740 or above, according to Experian. This puts them in the “very good” or “exceptional” range and opens a lot of doors in terms of borrowing and accessing credit cards.
If your score isn’t quite there yet, here are some steps you can take.
- Pay your bills on time: Your payment history is the most powerful part of your credit score calculation. Even one late payment can seriously ding your score. If you sometimes miss bills, consider using autopay to help keep on top of them.
- Lower your credit card balance: Credit utilization is also important — it’s essentially the percentage of available credit you’re using. So if you owe $4,000 balance on your credit cards and the total available limit is $10,000, your rate would be 40%. Try to keep this at 30% or lower.
- Don’t shut down old accounts: The length of time you’ve been managing debt matters. So if you’ve had a no annual fee credit card for some time, keep it open.
Bottom line
With a little effort, you can improve your credit score. It’s about how you handle debt, so paying your bills on time and not maxing out your credit cards can make a difference. And while there are great reasons to get your score above 780, once it’s there, getting it higher really only gets you bragging rights.