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From the Washington Post: Benefit of higher credit score dwindles at top end

The Associated Press
Monday, September 27, 2010; 6:19 PM
NEW YORK -- Have you been working to boost your credit score before trying to get a mortgage? It may not yield the payback you expect.

The mortgage loan interest rates offered to borrowers with stellar FICO scores aren't much lower than the rates offered to those with a middle-of-the-road 720 score these days.

That means that efforts to drive up a credit score to lofty heights aren't likely to produce substantial savings over the life of the loan.

The real savings comes from getting your score to that magic line of 720.

An analysis of interest rate quotes made through real estate website during the first half of September found that prospective borrowers with FICO scores of 620 or below aren't likely to get any mortgage offers. "These lenders are really not looking at people under 620 at all," said Stan Humphries, chief economist for Zillow.

That means well over a quarter of U.S. adults have little or no access to mortgage loans right now, based on the most recent distribution of scores provided by FICO. That's because credit remains tight and banks, which have written off billions in bad loans in the past three years, are trying to keep their risks low, so they're bypassing the diciest borrowers. "As the housing market continues to improve over the next five years, then this situation will also change," Humphries predicted.

For potential borrowers with scores between 620 and 720 - roughly another quarter of U.S. adults - the lowest annual interest rate offered by lenders through shows the impact a few credit score points can have.

- For scores between 620 and 639 the best average annual percentage rate offered was 4.9 percent.

- For scores between 640 and 659, the rate was 4.73 percent.

- For scores between 660 and 679, the rate was 4.6 percent.

- For scores between 680 and 699, the rate was 4.56 percent.

- For scores between 700 and 719, the rate was 4.44 percent.

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