Card Sharp by AnnaMaria Andriotis

Until recently, a credit score of 680 was meaningfull. It meant you paid most of your bills on time, got dinged a little when you went shopping for a refi, but in general you were solid enough to get a loan at the best rates.

Not anymore. That 680 is firmly second-tier these days. Now, borrowers need at least 720 to get the biggest loans or the best terms, and that  includes a credit card with the longest 0% APR promotion or a jumbo mortgage. For millions of once-desirable consumers with scores between 680 and 720, you will now have to pay more.

There’s no wiggle room, either. Lenders place borrowers into brackets, which means someone with a score of 719 is lumped into a bracket that starts as low as 690. That one measly point could cost more than $600 over the life of an average 36-month car loan, or $2,500 over the life of a 15-year home equity loan, according to Informa Research Services.  For their part, lenders say the credit scores aren’t arbitrary and that a score of 720 predicts the borrowers who are most likely to repay their debts and least likely to default. They’re also more profitable than people with a perfect score of 850, because they’re also likely to carry a balance or incur fees – and therefore, to generate profit for the lender.

As for 680, it’s become a casualty of the market crash. When Fannie Mae and Freddie Mac were backing mortgages after the crash, they settled on the 720 threshold for the best pricing, says Keith Gumbinger, a vice president at HSH Associates, a mortgage-data tracking firm.

Of course, while earning a 680 wasn’t all that difficult before the recession, the new good-credit bar of 720 is harder to reach. With more people out of work and unable to pay their bills, even consumers with previously envious credit scores might not reach 720. To get there, a consumer would need low balances on credit cards and a 15-year credit history — but might have missed a couple payments over the last two years. Someone who regularly pays on time could drop from the mid-700s if he applied for several new credit cards recently.

For someone on the cusp, the differences could be as small as one extra credit inquiry – like when a lender looks up your credit score before approving you for a loan, or if a prospective employer pulls your credit report without telling the credit bureaus it’s strictly for employment reasons. The same thing could happen if you’re suddenly using more of your available credit because you made a big purchase, says John Ulzheimer, president of consumer education at Credit.com.

More at:  http://www.smartmoney.com/personal-finance/debt/credit-scores-what-you-need-now/