Slight increases in credit score lead to big savings
A difference of 20 or 30 points on a credit score can translate into thousands of dollars in mortgage costs, depending on where a borrower lives.
That is the central finding of a new nationwide study released by AD Mortgage, which analyzed how reaching a 760 FICO score—a level often associated with the most competitive mortgage rates—affects long-term borrowing costs across all 50 states. The report compares projected interest payments for average-score borrowers and those who reach the 760 benchmark on a 30-year fixed-rate loan.
AD Mortgage’s analysis shows that borrowers who improve their credit score to 760 can reduce total interest payments by between $10,000 and $46,000 over the life of a loan, depending on the state. The scale of savings varies based on local home prices and rate differentials tied to credit tiers.
More savings in certain markets
In higher-cost housing markets, the dollar impact is more pronounced. In California, the study estimates that reaching a 760 score can result in approximately $42,753 in lifetime interest savings. Hawaii and Massachusetts also rank among the states with the highest absolute savings, driven largely by elevated median home values.
In Texas, borrowers who reach the 760 threshold can save about $26,881. The study notes, however, that Texas also shows one of the largest proportional penalties for borrowers below 760, with added costs exceeding 10.7% of the total loan amount. Similar patterns appear in Alabama, Mississippi, Georgia, and Louisiana, where interest savings after reaching top-tier credit can surpass 10% of the loan balance.
AD Mortgage’s report also examines how long it may take borrowers to reach a 760 score. In most states, improving an average FICO score to that level is estimated to take between 1.5 and 3 years. In states with lower average credit profiles, the timeline may extend beyond that range.
Positive impact on affordability
When compared with household income, the affordability impact becomes more pronounced in higher-cost states. In Hawaii and California, projected lifetime savings from achieving a 760 score can exceed 40% of annual household income, according to the analysis.
“This data reinforces just how central credit preparation is to homebuying affordability. Two borrowers with similar incomes can experience dramatically different buying power depending on their credit scores and the state in which they purchase. Even a 20- or 30-point difference in FICO can mean tens of thousands of dollars over the life of a mortgage,” AD Mortgage CEO Max Slyusarchuk said.
