When you have a credit score of 750, your credit is usually considered very good or excellent by creditors. This means you should have no trouble getting approved for credit cards with rewards and incentives, and you’re likely to be approved for car loans and mortgages. A question you may have is “How much can I borrow with a 750 credit score?”
How Do Creditors Determine Loan Amounts?
Your credit score is like a report card that lets potential lenders know how well you have handled borrowed money and how much risk they might expect if they loan you money. A 750 credit score is very good, but your credit score isn’t the only factor potential lenders look at. Other factors they’ll consider in determining your loan amount include:
- Employment history – Looking at your employment history gives creditors an idea of whether you’ve demonstrated responsibility and stability.
- Gross monthly income – This is your income before taxes and other deductions are taken out. You may need to submit pay statements and bank statements to document your gross monthly income.
- Monthly expenses – Lenders may consider what other monthly expenses you have, such as property taxes, insurance, utilities, and credit card payments.
- Debt-to-income ratio – To lenders, the ratio of how much debt you have to your income is a good indication of how much you can afford to borrow. If you’re applying for a mortgage, lenders expect that you’ll spend less than 28% of your gross monthly income on your mortgage payment, and they’ll typically look for a debt-to-income ratio of 36% or less.
- Down payment – If you’re trying to borrow money for a new car or for a mortgage, the amount of money you have saved for a down payment affects the amount of money you need to borrow. If you’re trying to buy a house, saving a down payment of 20% can have a positive impact on an application for credit.
It’s a good idea to do your own evaluation of your budget to see how much of a new payment you can comfortably afford. There are times when creditors are willing to approve loans for borrowers that may stretch the budget very thin. If you take on debt that you can’t comfortably afford, you may do damage to your credit that will follow you around for years.
Getting Ready to Apply for Credit
Before you apply for any type of credit, review your credit reports to make sure everything on them is accurate and that you aren’t faced with any surprises in the middle of a credit application. Credit report errors are surprisingly common, and if the wrong information is on your credit reports, it can have a negative impact on your credit score. If your credit score is lower than it should be, it can affect your interest rate and monthly payment on any type of loan.
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