Having good credit is an essential part of healthy finances, and something most people aim to achieve. However, it’s by no means an easy thing to accomplish and maintain. And if you’re looking to have excellent credit, that makes things even more challenging — no room for financial missteps.
Still, those who manage to achieve and maintain excellent credit will undoubtedly enjoy many benefits. It’s safe to say that their hard work will pay off, considering how much easier it is to get various loans with excellent credit. Here’s everything you need to know about borrowing with excellent credit:
What Is Excellent Credit?
Excellent credit is an advantage that unlocks all of the perks of borrowing, and it ranges between 800 and 850. In all loan categories, you will be able to access the best and the cheapest option, so you’ll be saving money every time you utilize those options.
Some loan sources will be cheaper than others, so it’s worth looking into them to make an informed decision.
Borrowing from Banks and Credit Unions with Excellent Credit
There are different pros and cons to weigh when it comes to borrowing from various banks and credit unions. We know credit unions are member-owned and tend to offer better terms than banks on average, so chances are you’ll be paying a lower rate of interest if you decide to go to a credit union.
But as a customer with excellent credit, you may have a distinct advantage at your bank, especially if the value of your assets on deposit with them is significant. Banks will fight to retain the business of preferred customers (such as yourself) by offering preferential rates and terms. If you contact your bank, you will likely be offered a special arrangement.
Borrowing from Loan Aggregators with Excellent Credit
After contacting your bank, your next step in hunting for the best deal should be to let the lenders come to you with their best offer. Loan aggregators are online platforms that gather lenders. All you have to do is fill out a short application and wait for the offers from the lenders to roll in.
Getting a Home Equity Loan with Excellent Credit
Home equity loans come with the best terms and the lowest interest rates for customers with excellent credit because they are secured by your house, and the bigger the home-equity, the higher the amount you can borrow. That’s what makes them particularly attractive, but it is important to be careful when selecting the type of home equity loan you’ll be getting.
Pay attention to whether you’ll start with interest-only payments and how long they will last to avoid unexpected payment shocks. Read the fine print and consider all the options.
When to use Peer-to-Peer Lenders
Going to peer-to-peer lenders will likely be an unnecessary expense to you, except in one case: getting a business loan. In all other cases, you’ll probably find better terms with banks or credit unions.
If you have a small business, make use of a P2P unsecured personal loan. Your excellent credit will provide you a low rate, and you can then grow your business much more easily than with a bank or credit union.
Car Dealer Financing and Auto Loans with Excellent Credit
Car dealerships might want to get you into higher rate car loans so that they can increase their fees via financing. When you have excellent credit, it’s not going to be cost-effective for you to rely on dealer financing. You can get them to give you a better offer by letting them know your bank or credit union pre-approved a better deal.
Getting an auto loan with the best rates that are available should also be relatively easy with excellent credit. Credit unions tend to offer the lowest rates and great terms for auto loans. Excellent credit allows you to have the best possible position going into borrowing, so make sure to use that.
Mortgages and Excellent Credit
If you’re looking for a mortgage and have excellent credit, you’ll be happy to know that this may be the category that benefits the most from a great credit score. High-interest rates tend to be a big problem for hopeful homeowners, especially if their credit score isn’t up to par.
However, it is possible to get a mortgage even with a score as low as 580 — so imagine how much better your position will be with a credit score of 800 and higher.
Mortgage Savings with Excellent Credit
Everything is based on your credit score, including private mortgage insurance. You will need it if your down payment is less than 20% of the purchase price, or if you have less than 20% equity for a refinance.
Depending on the price of the home you’re purchasing, your rates and the percentage of down payment, you could save a nice amount of money on premiums on a monthly or annual basis. What’s more, the PMI savings will be added to your lower interest rate savings, so your home might end up costing you tens of thousands of dollars less than it would have with worse credit.
Do’s and Don’ts when You Have Excellent Credit
If your credit is already excellent, chances are you know how to manage it. Still, it might be useful to go over a few best practices as well as what to avoid to maintain that score.
The main tip is to keep on making your payments on time and keeping the balances on your credit cards low. However, it’s also important to keep in mind that new loans can decrease your credit score if you apply for them too frequently. Avoid co-signing loans, because the risk is just too considerable — and make sure to monitor your credit constantly. That way, you’ll stay on top of any potential errors.
Having excellent credit is going to open many doors for you and make your financial life much easier. With our guide on borrowing with excellent credit, you can be sure that you’re getting the best value for your money. All you have to do is maintain your score and enjoy the benefits of low-interest rates and excellent terms.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.