Listen up, because I’ve got exciting news – your credit score has hit 670! That’s awesome. Seriously, give yourself a high five, pop some champagne, and do a happy dance. Reaching 670 is a BIG milestone that deserves celebrating!
Let me explain why this specific number is so pivotal. Then we’ll look at how it shakes things up for your finances.
A credit score of 670 represents an important inflection point that opens up new financial opportunities.
This number signifies the threshold between fair and good credit, according to FICO – the most widely used scoring model. By surpassing the 670 mark, individuals unlock better access to credit, cross the halfway point to above-average credit, and avoid the perils of subprime borrowing.
Let’s explore why this specific credit score holds such financial significance by looking at key factors in detail.
The Importance of Credit Score Classifications
FICO credit scores range from 300 to 850, with higher scores indicating lower credit risk. Scores are grouped into rating categories that give lenders a quick snapshot of a borrower’s creditworthiness.
Breaking Down FICO Credit Score Classifications
According to FICO, credit scores are segmented as follows:
- 800-850: Exceptional
- 740-799: Very Good
- 670-739: Good
- 580-669: Fair
- 300-579: Very Poor
As we can see, a score of 670 sits right on the boundary between a Fair and Good credit score based on this scale.
Why 670 Represents the “Good” Credit Threshold
Though 670 falls into the Fair category, FICO actually designates scores from 670-739 as “Good” credit. This means hitting the 670 mark signals to lenders that a borrower has officially crossed over into good credit territory.
This distinction is important because individuals with Good credit are considered acceptable borrowers by most mainstream lenders. Thus, 670 becomes the “Good” credit threshold that unlocks better access to financing.
Opportunities at 670
A credit score of 670 may not guarantee ultra-low interest rates, but it does open doors to financing options.
1. Credit Card Approvals: At 670, approval odds for many credit cards look far more favorable. Issuers will likely approve you for mainstream cards tailored to those with average credit. Premium travel and cash-back cards aimed at consumers with Excellent credit may still remain out of reach.
You can expect a graduating annual fee of around $95 and to put down a refundable security deposit on your credit limit. Rewards will be available but generally unexceptional compared to premium cards.
2. Auto Loans: A credit score of 670 makes it possible to get approved for an auto loan from most major lenders. However, interest rates will likely be higher than applicants with very good or exceptional scores.
According to Bankrate, those with scores in the Good range may see average interest rates around 7-8% for a new car and 9-10% for a used vehicle. That still beats the double-digit rates of subprime borrowers.
3. Mortgages and Home Loans: Mortgages may be accessible in the mid-60s, though borrowers will pay interest rates above the most competitive 30-year fixed rates. Lenders also look at debt-to-income ratios and down payments, so a 670 score alone doesn’t guarantee approval.
But it does open the door wider to FHA loans, VA loans, and other programs catering to average credit borrowers. This lays the groundwork for eventually qualifying for top-tier conventional mortgages in the future.
4. Personal Loans: Online lenders and banks will often approve personal loans for applicants with a 670 credit score. However, they will assess factors beyond your credit, including income, existing debt burden, and loan purpose when making decisions.
Interest rates will be higher than those offered to consumers with very good or exceptional credit. Average rates on a 3-year personal loan will be in the 10-15% range for borrowers with credit scores around 670.
Opportunities to Level Up Your Credit Score from 670
A 670 credit score establishes your baseline creditworthiness as “Good” but still leaves ample room for improvement. Boosting your score from here unlocks the path to truly exceptional financing terms reserved for higher score tiers.
1. Pay Down Balances: Reducing credit card balances relative to spending limits – also known as the credit utilization ratio – can quickly boost scores by demonstrating responsible usage and available credit. Thirty percent or less credit utilization per card is ideal.
2. Mix Up Account Types: Having credit cards, auto loans, mortgages, and installment loans contributes to a healthy credit mix that diversifies your profile. This mix signals you can manage different types of credit responsibly over time.
3. Make Payments On Time: Payment history is the biggest factor in credit scores. Set payment reminders to pay at least the minimum by the due date every month without fail. Even one 30-day late payment can drop scores by over 100 points.
4. Limit New Credit Applications: Each new credit application causes a hard inquiry on your credit report, which may ding scores temporarily. Minimize applications to only essential new accounts, letting your score recover between applications.
5. Watch Credit History Length: FICO favors longer credit histories, so keeping your oldest accounts open avoids decreasing your history’s average length. Long credit histories indicate stability and experience managing credit responsibly.
Lender Perceptions at 670 Credit Score
While a credit score of 670 makes you an acceptable borrower, lenders still view higher scores more favorably. Here are key lender perceptions based on a 670 score.
1. Moderately Increased Risk: Lenders associate higher credit scores with lower default risk. So a 670 score flags moderately increased risk compared to exceptional borrowers with scores above 740. Approval is likely but could require justifying factors beyond your credit score.
2. Qualified for Average Market Rates: Mainstream lenders will likely approve credit at average prevailing rates, rather than the rock bottom rates reserved for ideal borrowers. Published rates are often the best-case scenarios only offered to a fraction of top-tier applicants. Expect interest rates in the ballpark of 7-12% for auto loans and mortgages with average credit.
3. Opportunities to Cross-Sell: You’ll be on the radar for lenders’ cross-selling efforts. Look for offers to upgrade your credit card, refinance your mortgage, or take out additional loans and lines of credit. Lenders want to build long-term relationships with borrowers climbing the credit score ladder.
4. Targeted for Balance Transfers: Expect attractive 0% balance transfer offers aimed at consolidating debt from multiple cards onto a new card. This lets issuers pick up your existing balances business from competitors while you enjoy 0% interest for 12-15 months.
How a 670 Credit Score Compares to the U.S. Average
Contextualizing your 670 credit score against national averages further highlights why it represents a tipping point toward good credit.
1. Surpassing the Mid-600s: The average credit score in America is 714 according to Experian’s 2022 State of Credit report. A score of 670 puts you just 44 points away from this midpoint, out of the lower 600s and heading upwards closer to good credit territory.
2. Above Average Among Young Generations: Gen Z (age 25 and below) has an average score of 665. Millennials (ages 26-41) average 679. For younger borrowers, a 670 score means surpassing your peer average.
3. Beating Over Half of Consumers: About 55% of consumers have credit scores below 700, meaning a score of 670 puts you ahead of over half of the Americans with credit reports.
This above-average standing relative to U.S. consumers signals positive credit management momentum.
Avoiding the Pitfalls of Subprime Credit
A credit score below 620 is generally considered subprime, characterized by difficult access to credit and very high-interest rates from a limited pool of lenders. By exceeding 670, borrowers dodge the barriers and predatory lending practices that often accompany subprime credit scores.
1. Less Need for Subprime Lenders: Alternative subprime lenders like payday lenders, pawn shops, and auto title loan lenders charge excessively high rates and fees. However, a credit score of 670 provides sufficient access to mainstream financing options and makes reliance on subprime lenders unnecessary in most situations.
2. Lower Chance of Pre-Approval Rejections: Many major credit cards and auto lenders issue pre-approved offers to customers they deem worthy candidates. Credit scores below 620 see much higher rejection rates when accepting these pre-approved offers due to subprime status. But at 670, the chances of successfully activating most pre-approved offers look significantly better.
Access to Prime Borrowing Rates
Prime lending rates refer to the low benchmark rates set by the nation’s largest banks and extended to only the most creditworthy consumers. A 670 score still falls shy of prime eligibility, but places borrowers well outside of the subprime range, avoiding its egregious rates.
Surpassing the 670 credit score threshold helps shield consumers from inflated borrowing costs, limited financing access, and revolving debt traps that often accompany subprime credit scenarios.
Summary: Why 670 Represents a Major Credit Milestone
A 670 credit score signifies crossing into “Good” credit, which opens up new borrowing opportunities, more permissive lender approval, and chances to further improve your credit standing over time. This pivotal number marks a turning point of creditworthiness that builds financial flexibility.
While not flawless, a 670 credit score demonstrates your commitment to responsible credit management and positions you on the favorable side of fair credit. Continued prudent use of credit from here can propel your score even higher, unlocking the most competitive interest rates and personalized products reserved only for exceptional credit.