The Difference 1 Point Can Make On Your Credit Score

Credit scores range anywhere from 300 – 850. So, with so broad of a range, you wouldn’t think that 1 point could make all that much of a difference. I mean, it’s only one point… right?

Well, not necessarily.

For the most part, 1 point isn’t going to make a huge difference on your credit scores. That is, depending on what range you find yourself in. If you have a very low score, or a very high score, a one point difference isn’t really going to matter all that much to you. But, if you are in the more common range of credit scores, the difference of one point can really start to make a difference.

The difference 1 point can make on your credit score

If you have a very low score, or a very high score, the difference between a few points on your score isn’t going to affect your interest rates all that much. With these type of scores, your lenders will just deem you as a person with poor credit, or high credit, and determine your interest rates accordingly.

This may come as a surprise, but very large ranges of scores will be given very similar interest rates. For example, a score anywhere between a 720 to an 850 (a perfect credit score), will all give you almost the exact same interest rates. That means that a full 130 points difference on your credit score may not even make that much of a difference!

But, if you have a score in the range of the mid 600’s, one point can truly affect you.

If your score happens to fall between a 619 and a 620, that one point can make a huge difference. That one point can change your interest rate dramatically. Let’s say you are looking into a 30-year fixed rate loan. According to an article on How Stuff Works, if you have a score of 620, you can expect an average interest rate of 7.693%. But, for that same loan, if you have a credit score of 619 (just one point lower), that would bring you down to the next credit score bracket, bringing your interest rates up to 12.018%.

That means you could be paying over a 4% increase in interest rates, just because of one measly point on your credit score. That one small point could cost you literally thousands of dollars across the life of your loan!

What can be done?

So, what can you do if you find yourself as one of those people who are paying higher interest rates because of one or two points on their credit score? The first step is to always work to make sure you have the best payment habits as possible. This can help you to have the highest credit score possible, giving you the best interest rates.

Another thing you will want to do is to make sure that all of the items on your credit reports are actually correct. Most people have inaccurate items on their credit reports. For some people, these inaccurate items may only affect their score a few points, and that might not make a huge difference to them. But as I explained above, if these incorrect items take your score from a 620 to a 619, that could be costing you thousands! Order copies of your credit reports. If you find you have inaccurate items on your reports, it may be a good idea to hire a credit repair company to help you get those incorrect items removed from your reports. This simple step could make the difference of several points on your reports, and could end up saving you a whole lot of money in the end.

Nicole is a blog writer, specializing in credit and credit scores. She has been writing about credit for years, and loves helping others improve their credit.