Raising a ‘Fair’ Credit Score to ‘Very Good’ Could Save Borrowers Over $22,000
Money talks, and so does your credit score. According to the latest LendingTree study, raising your credit score from fair (580 to 669) to very good (740 to 799) could help you save significantly on debt payments — to the tune of over $22,000.
Researchers analyzed anonymized LendingTree user data and loan offers to measure the difference in savings between these two credit bands for credit cards, personal loans, auto loans and mortgages.
Key findings
- Raising your credit score from fair to very good could save you over $22,000. Borrowers with four common debt types — credit cards, personal loans, auto loans and mortgages — could save $22,263 over the lifetime of the credit and loans by improving their credit score from fair (580 to 669) to very good (740 to 799).
- This breaks down to a monthly savings of $92, which is especially important amid inflation woes. Total average monthly payments would be $3,331 with fair credit and $3,239 with very good credit.
- Improving your credit score has the largest impact on your mortgage costs. Boosting your credit score from fair to very good could result in $16,677 in mortgage savings, accounting for 75% of the total savings.
- The potential savings of $22,263 is down significantly (though still substantial) from $49,472 when we last conducted this study in 2022. All categories saw a decrease in savings. Mortgage savings decreased the most, by $23,364. That’s due to the difference in the average APRs offered to consumers with very good and fair credit scores. The difference in average mortgage APRs was 0.56 percentage points in 2022, compared with 0.22 percentage points this time around.
- Finding your best offer is significant, as the gap between the lowest and highest APRs offered to the same consumers can be large. If you have a very good credit score, you could save up to $27,538 compared to the best offers available for those with fair credit scores. In fact, the monthly payment difference between fair and very good credit scores could be as high as $136.
Raising your credit score could save you tens of thousands
Borrowers with four common debt types — credit cards, personal loans, auto loans and mortgages — could save $22,263 over the lifetime of their credit and loans by improving their credit score from fair (580 to 669) to very good (740 to 799).
Breaking that down further, those with fair credit would pay $3,331 a month and those with very good credit would pay $3,239. That’s a difference of $92 a month.
Why does boosting your credit score help? It serves as a gauge for lenders, demonstrating your likelihood of repaying borrowed money. A higher credit score increases your chances of being offered more favorable loans, but we’ll break down differences in APRs later.
Mortgage payment savings are the highest
By loan or credit type, improving your credit score makes the biggest difference for mortgage costs. Borrowers could save $16,677 in mortgage costs by increasing their score from fair to very good, accounting for 75% of the total savings.
Following that, here’s the cost difference between the two credit score bands by loan or credit type:
- Credit cards: $3,548, or 16% of the total savings
- Personal loan: $1,485, or 7% of the total savings
- Auto loan: $553, or 2% of the total savings
| Money saved by raising your credit score from fair to very good | |||||
|---|---|---|---|---|---|
Fair credit (580 to 669) |
|||||
| Debt type | Average loan/credit amount | Loan term | APR | Monthly payment | Total payments |
| Credit card | $6,993 | Variable | 28.07% | $64 | $21,668 |
| Personal loan | $9,810 | 3 years | 30.17% | $417 | $15,025 |
| Auto loan | $27,187 | 5 years | 13.64% | $628 | $37,652 |
| Mortgage | $303,426 | 30 years | 7.98% | $2,222 | $799,993 |
| Total | N/A | N/A | N/A | $3,331 | $874,339 |
Very good credit (740 to 799) |
|||||
| Debt type | Average loan/credit amount | Loan term | APR | Monthly payment | Total payments |
| Credit card | $6,993 | Variable | 21.11% | $69 | $18,121 |
| Personal loan | $9,810 | 3 years | 22.29% | $376 | $13,540 |
| Auto loan | $27,187 | 5 years | 12.98% | $618 | $37,099 |
| Mortgage | $303,426 | 30 years | 7.76% | $2,176 | $783,316 |
| Total | N/A | N/A | N/A | $3,239 | $852,076 |
| Source: Analysis of anonymized LendingTree user data and loan offers in the third quarter of 2023. | |||||
Why are mortgages highest? According to Schulz, it largely boils down to interest paid.
“A home is the biggest purchase that most people will ever make,” he says. “We’re talking hundreds of thousands of dollars of principal financed over decades, meaning a tremendous amount of interest. Even a fraction of a percentage point off a mortgage rate can lead to significant savings over the lifetime of that loan, but you can make an even bigger impact by improving your credit score. There’s little in life that’s more expensive than having crummy credit, and that’s certainly the case when it comes to a mortgage.”
While borrowers with fair credit scores can expect to pay just 3.5% more in interest on their mortgages than those with very good credit scores, they’re taking out an average of $303,426 on a 30-year mortgage — a significant chunk of cash. Meanwhile, borrowers with fair credit scores can expect to pay 39.8% more in interest on personal loans and 31.9% more in interest on credit card debt.
Potential savings are down significantly compared to 2022
While potentially saving $22,263 is no small feat, those savings are down from a whopping $49,472 when we last conducted this study in 2022.
Savings fell across all loan and credit types, but mortgage savings decreased the most. In 2022, borrowers could save $40,041 by increasing their credit score, but that fell to $16,677 in our late 2023 analysis published in 2024 — a difference of $23,364.
A large chunk of this difference boils down to the difference in the average APRs offered to consumers with very good and fair credit scores. In 2022, the difference in average mortgage APRs was 0.56 percentage points (with fair credit borrowers offered an average APR of 5.88% and very good credit borrowers offered an average APR of 5.32%). That compares with a difference of 0.22 percentage points this time around.
Difference in savings by raising your credit score, 2022 to 2023
| Debt type | Loan term | Amount saved in 2022 | Amount saved in 2023 | Difference |
|---|---|---|---|---|
| Credit card | Variable | $3,747 | $3,548 | $199 |
| Personal loan | 3 years | $3,171 | $1,485 | $1,686 |
| Auto loan | 5 years | $2,513 | $553 | $1,960 |
| Mortgage | 30 years | $40,041 | $16,677 | $23,364 |
| Total savings | N/A | $49,472 | $22,263 | $27,209 |
Source: Analysis of anonymized LendingTree user data and loan offers in the second quarter of 2022 and third quarter of 2023.
The economy played a major role in this decrease in savings. As inflation ravaged the country, one of the ways the government chose to fight it was by raising interest rates. The idea, in part, is that higher interest rates likely mean less demand for lending, which leads to fewer people buying and lower inflation.
“No one has been immune to interest rate increases,” Schulz says. “In fact, our data shows that interest rates on auto loans, personal loans, credit cards and mortgages for people with very good credit grew faster than for those whose credit was merely fair. That meant that the financial advantage of having better credit, while still quite sizable, wasn’t quite as great as it had been.”
While the potential savings from improving your credit score has fallen between 2022 and 2023, those savings have dropped even further since 2019, falling from $51,694 in the third quarter of 2019 to $22,263 in the third quarter of 2023. Savings for personal loans, auto loans and mortgages fell, but savings for credit cards increased — going from $2,995 in 2019 to $3,548 in 2023.
Difference in savings by raising your credit score, 2019 to 2023
| Debt type | Loan term | Amount saved in 2019 | Amount saved in 2023 | Difference |
|---|---|---|---|---|
| Credit card | Variable | $2,995 | $3,548 | -$553 |
| Personal loan | 3 years | $3,436 | $1,485 | $1,951 |
| Auto loan | 5 years | $3,847 | $553 | $3,294 |
| Mortgage | 30 years | $41,416 | $16,677 | $24,739 |
| Total savings | N/A | $51,694 | $22,263 | $29,431 |
Source: Analysis of anonymized LendingTree user data and loan offers in the third quarters of 2019 and 2023.
That’s largely due to increases in loan amounts. The average difference in APR between a fair credit score and a very good credit score for credit cards was 7.00 percentage points in 2019, but that dipped slightly to 6.96 percentage points in 2023. However, the amount borrowed spiked from $3,668 in 2019 to $6,993 in 2023 — which means a better APR certainly made more of a difference in 2023.
The difference in APRs offered can be crucial
One of the biggest reasons raising your credit score can help you save is because it unlocks better APRs — and finding your best offer is significant.
For example, you could save up to $27,538 with the best offers available across all loan and credit types compared to the best offers available for those with fair credit scores. That translates to a difference of $136 a month.
The biggest savings can again be found in mortgages, with a cost difference of $20,161. That’s 73% of the total cost difference. Following that, here’s the total cost difference by credit or loan type:
- Credit cards: $3,548, or 13% of the total savings
- Personal loan: $1,925, or 7% of the total savings
- Auto loan: $1,904, or 7% of the total savings
| Money saved by raising your credit score from fair to very good with the best offers | |||||
|---|---|---|---|---|---|
Fair credit (580 to 669) |
|||||
| Debt type | Average loan/credit amount | Loan term | APR | Monthly payment | Total payments |
| Credit card | $6,993 | Variable | 28.07% | $64 | $21,668 |
| Personal loan | $9,810 | 3 years | 27.34% | $402 | $14,482 |
| Auto loan | $27,187 | 5 years | 13.17% | $621 | $37,257 |
| Mortgage | $303,426 | 30 years | 7.59% | $2,140 | $770,519 |
| Total | N/A | N/A | N/A | $3,227 | $843,927 |
Very good credit (740 to 799) |
|||||
| Debt type | Average loan/credit amount | Loan term | APR | Monthly payment | Total payments |
| Credit card | $6,993 | Variable | 21.11% | $69 | $18,121 |
| Personal loan | $9,810 | 3 years | 16.81% | $349 | $12,558 |
| Auto loan | $27,187 | 5 years | 10.86% | $589 | $35,353 |
| Mortgage | $303,426 | 30 years | 7.32% | $2,084 | $750,357 |
| Total | N/A | N/A | N/A | $3,091 | $816,389 |
| Source: Analysis of anonymized LendingTree user data and loan offers in the third quarter of 2023. | |||||
How can you find the best deals?
“Sites like LendingTree can be incredibly helpful, allowing you to easily compare offers from multiple lenders,” Schulz says. “You can also go to individual lenders’ websites, including credit unions, to see what they have to offer. There can be very real differences among lenders, so you could pay too much if you don’t shop around. It’s as simple as that.”
Struggling to raise your credit score? Top expert tips
Raising your credit score can seem daunting, but small steps can translate to great progress over time. For those looking for a credit score boost, Schulz recommends the following:
- Make sure your credit report is accurate. “One of the quickest ways to improve your credit score is to remove inaccurate information from your credit report,” he says. “Whether from fraud, simple human error or something else, more reports have inaccuracies than you’d imagine, and they can hurt your credit score. Good credit is hard enough without someone else’s mistakes holding down your score. Review your credit report and report it to the credit bureau to get it fixed if you find something that doesn’t look right.”
- Consolidate your debt. Debt consolidation can be a great tool for many reasons. “First, it can help you pay down your debt faster by lowering the amount of interest you pay,” Schulz says. “It can also help your credit in other ways, too, however. Moving your credit card debt to a personal loan, for example, can boost your credit by diversifying your credit mix and reducing your credit utilization.”
- Automate. “There’s nothing more important to your credit score than making on-time payments,” he says. “Set up automatic payments and let technology assist you in paying your bills more consistently. This won’t be a quick fix for your score, but it can lay the groundwork for steady growth over time.”
Methodology
LendingTree researchers calculated average balances and APRs for personal loans, auto loans and mortgages from offers on the LendingTree platform in the third quarter of 2023, aggregated by credit score band — fair (580 to 669) and very good (740 to 799). Researchers assumed 30-year mortgages, 60-month auto loans and 36-month personal loan terms.
The average credit card debt data was obtained by analyzing anonymized credit reports from about 310,000 LendingTree users in the third quarter of 2023. Credit card payments are calculated as 1% of the balance plus interest, with a minimum payment of $25. Credit card APRs were based on a December 2023 analysis of about 200 credit cards from more than 50 issuers.