Well-managed credit can help open doors to major life milestones. Credit score checks are key to many crucial life stages. Whether you’re renting an apartment, getting a car, or buying a house, your credit score will often play a major role. Thanks to your credit score, lenders can see in a snapshot of your credit and from there, can figure out how much credit you qualify for. But how is your credit score determined, and what score is needed to achieve these major milestones? We’ll dive into that below.
What factors go into a credit score?
Credit score works like a window into your level of responsibility with money — banks and other lending institutions use this three-digit number as a quick way to get a broad-based idea of your credit standing at the moment.
Your credit score starts with building credit history. Credit bureaus collect the past to predict how you'll manage credit going forward. Each credit report includes five factors that add up to create the score. These categories account for percentages that make up the whole.
These categories include:
- Payment history
- Amounts owed – AKA, your credit utilization ratio
- Length of credit history
- New credit
- Credit mix
Note that, when a lender does a credit check, they can see your entire credit report. Though your credit score acts as a snapshot, they still have access to more than just your score. If they wish to look deeper, they can also check how it breaks into facets.
What are the credit score ranges?
FICO® and VantageScore® are the two agencies that develop and report credit scores. They’ve defined scores on a spectrum that divide into ranges, from low to high. Each “grade” carries a particular value for lenders. From that grade level, they can assess amounts and interest rate of loans to issue.
FICO credit score ranges
- Exceptional: 800+
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 699
- Poor: 579 and below
VantageScore credit score ranges
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very Poor: 300 to 499
If your credit score hits the exceptional or excellent range, congratulations. You’re likely managing your credit responsibly and it shows. This credit score range may open up opportunities for approvals and higher credit limits. That may translate to lower monthly payments in the long-term plan for paying off loans. As you might expect, the other end of the score range often yields less swagger. Credit applicants with credits scores in the lowest ranges usually have fewer choices. In fact, finding out your credit score sits in the low range may be an opportune time to take a look at your credit report. A credit monitoring service, like Credit Journey can help.
Credit score for an apartment
Whether you’re looking for your first apartment or have been renting for years, your credit score plays a part in the approval process. There are typical requirements involved in applying for most apartment rentals, and, depending on your score, you may or may not snag the rental you have your eye on. According to Experian, the required score to rent an apartment will vary depending on the apartment’s landlord or property manager and even what city or neighborhood you’re looking to rent in. Familiarizing yourself with the rental application process and how it’s impacted by credit, however, might be beneficial before getting started.
Your rental application process in 3 steps
These are basic steps most tenant applications cycle through. To start, you’ll likely need documentation for the following items:
1. Credit check
It’s standard procedure for landlords, property managers, or rental agencies to request a credit check as part of an apartment application. That means you’ll be asked to provide your social security number and sign approval for a credit check. In other cases, they may ask you to pull your own credit report and provide it with your application.
2. Current and former addresses
Rental application addresses serve dual purposes. At base, this gives the building management your contact information. The history of your previous rentals also shows how long you lived in previous apartments.
3. Proof of income
Your credit score may be excellent and perhaps you’ve been a model tenant in the past. But if you don’t have adequate funds to pay the rent, getting approval for an apartment may still be a challenge. To show proof of income you can include tax returns, pay stubs, bank statements and/or a formal letter from an employer.
What if your rental application gets denied due to credit score?
There may be remedies you can try when your credit score isn’t high enough for apartment approval. For instance, you may want to find a cosigner for the lease. No matter what comes next, a rejection may serve as a wakeup call to focus on ways to raise your credit score.
Credit score to buy a car
Most car buyers are likely to need financing. That means borrowing money — usually from a lender like a bank. So, when it’s your turn to get a car, you might look into what credit score you’ll need. Lenders often check credit scores in the car loan approval process and have their own standards for approval.
That’s not the end of the story, though. APRs, or annual percentage rates, play an important role in car loans. These rates help determine how much loans will likely end up costing in the long term. The higher the percentage, the more you may agree to pay if you take that rate. Looking at a snapshot of other Experian car finance data, you might see a connection between APRs and credit scores. Here’s an example to illustrate:
Quarterly finance data on new vehicles purchased in 2021 (Quarter 2) pairs APRs by their corresponding credit score ranges:
- (300 to 500): 14.5 percent
- (501 to 600): 11.03 percent
- (601 to 660): 6.61 percent
- (661 to 780): 3.48 percent
- (781 to 850): 2.34 percent
So, when asking the question, what is a good credit score to buy a car? Well, loan acceptance or rejection doesn’t answer the whole question. That’s because auto financing often works like a package deal. It may take many years to pay off a car loan. Experian’s data shows consumers with the highest credit scores can get the lowest interest rates on average. It also shows that poor credit scores may correlate with the highest APR rates.
Credit score to buy a house
Seeking a mortgage? You may wonder what you need for a credit score to buy a house. Credit score does make a difference in the mortgage process, but the required credit score needed to buy a house depends on your lender and what type of loan you’re looking to qualify for. The amount of the mortgage you request and down payment you offer also make a difference.
There are also actions you may want to avoid during the homebuying process. It's a time when you may want to be thoughtful about protecting your credit score because you'll likely want to present your best potential on that mortgage application. So, there are credit activities you might consider pausing for a while. Here are a few things you may want to put on hold or avoid while applying for a mortgage:
- Applying for other loans
- Paying off loans
- Opening new credit cards or lines of credit
- Closing credit card accounts (since this can also impact your credit score)
Credit score matters for major life moments
No matter if you’re applying for a car loan, mortgage or apartment, your credit score may impact the results. Though there is no specific score required for any of life’s moments but building your credit and healthy financial habits may help you qualify for a line of credit to make that milestone purchase. Luckily, you don’t have to face them alone. Prepare for major milestones with your greatest potential and Credit Journey by your side.