How Banks Use Credit Scores

Banks set interest rates (the APR or annual percentage rate) based on the risk you pose. The higher the credit risk you appear to be, the higher your interest rate will be (you can also be denied new credit if your credit score falls below a certain number). On the other hand, if you have a low credit risk (represented by a high credit score), you’ll typically qualify for a lower interest rate.

Mortgage Rates

Banks don’t advertise what credit score will give you a specific interest rate. That won’t be determined until you fill out their applications/documents. In general, if you have a good credit score you can expect to receive a lower APR, which will save you money in the long run because you will pay less in interest. Vice versa if you have a low credit score you’ll receive a higher APR, which will end up costing you more money in interest for the duration of the loan.

‍Qualifying For Specific Rates

With loans, an average rate is often advertised instead of a specific number. This is to get your attention and garner a phone call. Once they talk to you and see your actual financial numbers, then they will determine what rate you qualify for. Unfortunately, it may not be anywhere close to what was advertised if your credit score is below average.
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Summary‍

To improve your chances of getting a better interest rate, make sure you don’t pay your bills late, you don’t hold a high amount of credit, you don’t have any bills in collections, and you keep an eye on your credit history for fraudulent activity. If you find yourself in a situation where your credit score is less than you want it to be, there are some great credit repair companies who can help you get on a better path. Remember, below average credit doesn’t always mean you can’t qualify for a loan (so don’t be discouraged), but know you will end up paying more in the long run if your scores fall into a bank's high risk range.