Getting A Loan With Excellent Credit—How To, Where & Why – Info Money Manage

Excellent credit puts you at the top of the credit food chain. You’ll have full access to the best, quickest, and least expensive credit available. And it can be a big help if you’re applying for a job or insurance policy, since both also rely on your credit history in making a determination about your acceptability.

If you have excellent credit, it’s clear you’re already doing everything right. For that reason, we’ll avoid most credit advice, and instead focus on loan opportunities available to you. Rest assured there are plenty.

What’s the definition of excellent credit?

As was the case in our articles on fair and good credit (links to other articles before publishing), we’re going to rely on the Experian definition of excellent credit.

Experian breaks excellent credit into two categories—very good and exceptional. But either qualifies as excellent with the vast majority of lenders.

Very good includes a credit score range between 740 and 799. 18.2 percent of the population fall into this category. Exceptional includes a credit score range between 800 and 850 (the maximum credit score possible). This group represents 19.9 percent of the population.

Whether your credit score comes under Experian’s definition of very good or exceptional, doesn’t make a whole lot of difference. Most lenders will consider a credit score of better than 740, and without any significant derogatory credit, to be excellent. You’ll be eligible for the best loan programs and pricing possible in virtually every lending capacity.

Let’s look at what kinds of financing is available if you have excellent credit.

Credit cards for people with excellent credit

When you have excellent credit, you’ll have your pick of the best credit card offers available. In fact, you’re probably getting multiple credit card offers on a regular basis. Lenders have access to databases showing who has excellent credit. They’ll take full advantage, and bombard you with offers.

And with your excellent credit, you’re in a position to select the very best offers available.

Here are some of the best credit cards for people with excellent credit:

Discover it® Cash Back

This offer requires Excellent, Good credit.

Card Highlights

• Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate.
• Plus, earn unlimited 1% cash back on all other purchases – automatically.
• INTRO OFFER: Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched.
• View Discover it® Cash Back details and how to apply »

The Discover it® Cash Back offers an introductory APR of 0 percent on purchases and balance transfers for 14 months. After the intro period, the APR range is13.74% – 24.74% Variable with no annual fee.

It also provides 1 percent cash back on all purchases, and up to 5 percent in select categories, up to a quarterly maximum when activated.

Read our full review of the Discover it® Cash Back

Chase Freedom®

This offer requires Excellent/Good credit.

Card Highlights

• 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.74-25.49%. Balance transfer fee is 5% of the amount transferred, $5 minimum
• Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
• Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
• View Chase Freedom® details and how to apply »

The Chase Freedom® offers an introductory APR of 0 percent on purchases and balance transfers for 15 months. After the intro period, the APR range is 16.74% – 25.49% Variable with no annual fee. The card also provides 5 percent cash back up to a quarterly maximum on select categories each quarter when you activate, plus unlimited 1 percent back on everything else.

Read our full review of the Chase Freedom®

BankAmericard® credit card

The BankAmericard® credit card offers an introductory APR of 0% Intro APR for 15 billing cycles for balance transfers made in the first 60 days. After the intro period, the APR range is 14.74% – 24.74% Variable APR on purchases and balance transfers with no annual fee.

Read our full review of the BankAmericard® credit card

Getting an auto loan with excellent credit

With excellent credit, you’ll have absolutely no trouble getting an auto loan. You can apply with any bank, credit union, or dealership-related lender, and get approved with the best rates available. Or, you can check out EVEN Financial, a loan matching service that will find you the best rates—so it’s really just more of a convenience for folks with excellent credit.

As a personal strategy, it’s best to apply with your own bank or credit union. Credit unions in particular tend to offer the lowest auto loan rates, since they’re member owned. At a minimum, apply for an auto loan with a credit union, then bring the loan approval to the car dealership. See if they’ll make you an even better offer. They may not be able to, but it’s always worth the effort.

Your excellent credit will not only ensure a speedy approval, but you’ll also be able get the best terms. That may include 100 percent financing—if that’s what you choose—and a loan term as long or short as you prefer.

You’ll definitely be in a preferred position when it comes to interest rates. Take a look at our auto loan calculator to see what kind of rate you can get.

Getting a mortgage with excellent credit

There may be no single loan type where having excellent credit can save you more money. Mortgage lenders will provide loans for people with credit scores as low as the 580 to 620 range. But the higher your credit score, the lower your interest rate will be.

And for what it’s worth, there really isn’t any significant difference in the interest rate you pay from one company to another. They all sell their loans under the same for programs—FHA, VA, Fannie Mae, and Freddie Mac. Your credit score will have a much bigger impact on the rate than the lender you apply with.

Check out our mortgage calculator to see what kind rate you can get.

The hidden benefit of excellent credit with mortgages

If you know much about mortgages, you’ve probably at least heard of private mortgage insurance, or PMI. But here’s a not so surprising fact—PMI premiums are also based on your credit score. In fact, the impact is even greater than it is with mortgage rates themselves, at least on a monthly basis.

PMI is required on conventional mortgages any time you make a down payment of less than 20 percent of a purchase, or you have less than 20 percent equity for a refinance. It’s not inexpensive.

Let’s work an example based on two credit scores.

For this example, we’re going to be referring to the MGIC Rate Card for PMI premiums. MGIC is one of the largest PMI providers in the nation.

Let’s say you’re purchasing a home for $400,000. You’re going to make a down payment of five percent—$20,000—and taking a 30-year fixed rate mortgage for $380,000. Put another way, you’ll be taking a mortgage equal to 95 percent of the purchase price. And that means PMI will be required.

If you have average credit, 680 to 699, the annual premium will be 1.08 percent with 30 percent coverage. That will result in an annual premium of $4,104, which will translate into a monthly premium of $342. That amount will be added to your basic mortgage payment, plus your property taxes and homeowner’s insurance.

By contrast, if your credit score is at least 760, the annual premium rate on the same loan drops to 0.41 percent. On a $380,000 mortgage, the annual premium is $1,558, or about $130 per month.

Adding up all the mortgage savings from excellent credit

Because of your excellent credit, you’ll save $212 per month, or $2,544 per year, just on your PMI premiums. When you consider you’ll be paying those premiums for several years, that can really add up. Over 10 years, that’s a difference of $25,440.

When you add the PMI savings to the money you’ll be saving from your lower interest rate on the mortgage itself, it adds up to tens of thousands of dollars.

This is why excellent credit is especially important when you’re applying for a mortgage, and particularly when you’re making a minimum down payment.

The best avenues to get credit when you have excellent credit

Excellent credit means virtually unlimited loan options. You’ll be entitled to the best pricing and terms available in all loan categories. Even so, some loan sources are better than others.

Banks and credit unions

With excellent credit, you’ll have your choice of banks and credit unions to borrow from. All will want your business—it’ll just be a matter of who will provide the best combination of interest rate and terms.

Credit unions are probably the better source, because they are owned by their members and operate as non-profits. As a result, you’ll usually pay a lower rate of interest.

However, if you have excellent credit, and substantial assets on deposit with a bank, you can often get preferential rates and loan terms. It’s common for banks to offer special financing arrangements for preferred customers. You should always check with your bank first, before going to any other loan sources.

Loan aggregators

With excellent credit, it might be to your advantage to get many lenders competing for your business. You can do this with a loan aggregator. Those are online platforms that many lenders participate in. You complete a brief application, and lenders send you loan offers. You can pick the one that works best for you. An excellent aggregator is Even Financial. Check with your bank or credit union, then try the aggregator to see if you can get a better deal.

Home equity loans

With excellent credit, you’ll get the best terms with the lowest interest rates on these loans. They can either be outright loans, or home equity lines of credit (HELOCs). Either are likely to have rates that are lower than what you can get on other loan types, since they’re secured by your house. You can also generally get higher loan amounts, particularly if you have substantial home-equity.

There are some caveats with these loans, and they can be found in the “fine print”. Read it carefully, and be aware of all provisions. For example, HELOC’s typically start with interest-only payments. And since your interest rate will be very low, the payments will also be low. However, the interest-only feature is temporary. Once it ends, you’ll be making interest and principal payments, generally for a very limited period of time, like 10 years. That can result in a major payment shock.

And both home equity loans and HELOC’s commonly come with a balloon provision. Your payment may be based on a 20 or 30-year term, but after 10 or 15 years, you may be required to pay the remaining balance entirely. Always be aware of these possibilities.

Loan sources to avoid when you have excellent credit

Peer-to-Peer (P2P) lenders

Generally speaking, excellent credit means you won’t need to turn to P2P lenders. Their rates probably won’t be as good as what you will get at a bank or credit union. More important, P2P lenders charge loan origination fees, ranging from one to six percent of the loan amount. But they do provide unsecured personal loans of up to $40,000 for any purpose.

However, the main reason for using a P2P when you have excellent credit is for business loans. You can get an unsecured personal loan

at a low rate, based on your excellent credit. You probably won’t be able to do this at a bank or credit union, because they don’t like to make loans to small businesses. P2P loans can be particularly beneficial with a new business, since you will not be required (nor able) to prove the financial viability of a business that hasn’t even been launched yet.

The most popular P2P lenders include Lending Club, Prosper, and SoFi.

Car dealer financing

Financing is a major source of revenue for car dealerships. They may steer you into higher rate loans, in order to collect a larger fee. Never rely on dealer financing. Instead, get a pre-approval from your bank or credit union first. Bring it to the car dealership, and make them offer you a better deal. If they can, go with their financing. But if they can’t, politely refuse the offer, and go with your bank or credit union instead.

Common document requirements for a loan application when you have excellent credit

Below is a list of documentation commonly required for loans of all types. Exactly which items you’ll be required to furnish will depend on the lender and the kind of loan you’re applying for. However, if you have excellent credit, lenders will often relax the documentation requirements. For example, if you have preferred customer status at a bank, they may not require any documentation at all.

Nonetheless, be prepared to furnish any and all of the following:

• Your most recent pay stub and W-2(s) to document your income.
• Evidence of Social Security or pension income (award letter or 1099).
• Contact information for your employer (the lender will verify your employment directly).
• Copies of completed income tax returns for the past two years, if you’re self-employed or work on commission.
• Make, model and value of your car; VIN number if you’re applying for an auto loan.
• If you’re paying or receiving child support or alimony, list the amount you’re paying or receiving.
• Bank or brokerage statements, or even retirement account statements.

How to maintain your excellent credit

If you have a credit score of 740 or higher, you probably don’t need much advice on credit. But since people do sometimes fall from excellent credit grace, let’s spend a bit of time talking about what to do—or not do—to maintain your high credit level.

Here are some do’s and don’ts:

• Do continue to make all your payments on time, including utility bills and medical payments.
• Don’t apply for new credit too frequently—new loans can drop your credit score.
• Do monitor your credit regularly. If errors appear, correct them immediately with creditors, and make sure they report the corrections to all three major credit bureaus.
• Don’t cosign loans. Even though you aren’t the primary borrower, if that person makes a late payment, it will be reflected on your credit report. If they default, that will also show up on your credit report.
• Do keep your credit card balances low. Even if you have a perfect payment history, your credit score can be negatively affected by an excessive credit utilization ratio.

Summary

Excellent credit is a definite asset, and one you’ll want to protect at all costs. It will enable you to pay less for financing every time.

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