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Where Homeowners Can Save the Most by Raising Credit Scores

You probably know what your credit score is. At least we hope you do! But a credit score can feel a bit abstract and people may underestimate just how important it is. To highlight the importance of your credit score, we estimated how much homeowners in different parts of the country could save on their mortgages by raising their credit scores. Below we rank the metro areas where homeowners can save most by raising credit scores.

Want to keep mortgage costs low? Check out the current mortgage rates.

In order to estimate how much a homeowner could save on their mortgage by raising credit scores, we compared interest payments on mortgages before and after a 50-point increase in average credit scores. Read our data and methodology below for a clearer picture on how we did this and where we got our data.

Key Findings

  • California saving – The Golden State claims five of our top 10 spots. Thanks largely to the high home prices in this state, residents have the potential to save quite a lot of cash.
  • Plenty of money on the table – Our data shows just how important mortgage rates are. For example by raising credit scores by 50 points the average resident across our top 10 cities can save an average of $58,900.
  • Smaller places would save, too – Just because the top 10 is dominated by big cities, does not mean it is not worthwhile for residents in smaller cities to keep an eye on their credit scores. While residents in less expensive cities may not save as much in total dollars they can still save quite a bit, especially when you compare the number saved to the average incomes.

raising credit scores

1. San Francisco-Oakland-San Jose, California

Residents in the Bay Area face some of the highest housing costs in the country. According to our data, the median home here is worth about $718,400. This means there’s plenty of room to save for residents who can improve their credit scores.

If the average credit score rose from 671 to 721, our data shows that the expected mortgage rate would drop from 4.29% to 3.72%. That change in mortgage rate yielded a savings of just under $87,000.

2. Honolulu, Hawaii

Honolulu residents could save the second-most by raising credit scores. With a relatively high average credit score of 691, we estimate that the average resident could get approved for a mortgage of about 4.38%. After moving that average credit score up to 741, we estimate that they could get approved for a mortgage rate of 3.81%.

This would yield savings of just over $75,160 over the life of a 30-year mortgage. One good thing in Hawaii homeowners’ favor is the low property taxes. Hawaii has the lowest property tax rates in the nation.

3. Santa Barbara-Santa Maria-San Luis Obispo, California

Residents in the Santa Barbara-Santa Maria-San Luis Obispo metro area have a relatively low average credit score. This means that they are likely paying relatively high mortgage rates. Our data shows that based on the current average credit score, the expected mortgage rate for residents in this metro area is 4.63%. After increasing the average credit score by 50 points, that expected mortgage rate dropped to 4.06%.

While that change in interest rate may not seem like much, anyone who has ever bought a home will know it’s significant. Overall we estimate that potential homeowners in this metro area could save just over $65,000 in total interest payments over three decades by improving their credit scores by 50 points.

4. Los Angeles, California

The median home in the Los Angeles area is fairly expensive. According to data from the U.S. Census Bureau, the average home was worth about $540,600 in 2015. By moving the average credit score here up 50 points, we estimate that the expected mortgage rate drops from 4.44% to 3.87%.

That drop in mortgage rate lowers total interest paid over the life of the mortgage from $444,375 to $378,809 for a total savings of $65,566.

5. San Diego, California

San Diego takes fifth for places where homeowners could save the most by improving their credit scores. According to our metrics, a 50-point increase in the average credit score could save the average San Diegan about $58,526. That is just over $2,000 per year.

That $2,000 could go toward retirement savings. After all it’s going to cost a lot to retire in San Diego! Or it may be a good idea to use that $2,000 to pay off credit card debt you may have.

6. Monterey-Salinas, California

The final California metro area to crack our top 10 is Monterey-Salinas. Residents here have an average credit score of 676. Based on that number, we estimate the average person would be approved for a mortgage rate of 4.56%. After raising credit scores by 50 points, we estimate that residents could unlock access to lower mortgage rates, around 3.98%.

Moving from 4.56% to 3.98% would save homeowners about $51,700 over the life of a 30-year mortgage. For a household which earns about $58,000 per year saving an extra $51,700 over 30 years is almost worth a 3% boost to annual income.

7. New York, New York

Homes throughout the New York metro area have a median value of $414,000. We estimate that with an average credit score of 686, residents of the New York metro area would be paying a mortgage rate of 4.44%. With a 4.44% interest rate on a mortgage of $414,000, we estimate that residents would pay a total of $336,029 in interest over the course of a 30-year mortgage.

By moving the average resident’s credit score up 50 points, we estimate that they may be approved for a mortgage rate of 3.87%. That would lower overall interest paid to $286,457.

8. Washington D.C., Virginia-Maryland-D.C.-West Virginia

Residents in the nation’s capital may be leaving a lot of money on the table. According our data, by raising their credit scores by 50 points, the average resident could save just over $48,000 over the life of a 30-year mortgage. That means monthly payments on the median home (worth $401,500) would go from $2,028 to $1,894.

Keep in mind these estimates do not include other factors which influence total monthly payments, like property taxes. If you are wondering how much property taxes affect your buying decision, our mortgage calculator can help.

9. Boston, Massachusetts

Residents in the Boston area have done a great job keeping their credit scores high. Boston residents have an average credit score of 698. This means they are in the range to qualify for some of the best money-saving personal finance tools. These include low mortgage rates in Massachusetts and low APR credit cards.

We estimate that the average Boston resident could expect to get approved for a mortgage rate of 4.30% before raising their credit score 50 points. After increasing it, we estimate that the expected mortgage rate would drop to 3.73%. That change in mortgage rate would mean savings totaling $46,654 over the course of a 30-year mortgage.

10. Seattle-Tacoma, Washington

The Seattle-Tacoma metro area takes the final spot on our top 10. The average credit score here is 691. Residents could save just over $119 per month by raising credit scores by 50 points. We estimate that average residents could lower the mortgage rate they’re paying from 4.38% to 3.81% by raising credit scores to 741.

raising credit scores

Data and Methodology

In order to find the places where homeowners could save the most by raising credit scores, we analyzed data for 199 metro areas. Specifically, we looked at the following three factors:

  • Median home value. Data on median home values comes from the U.S. Census Bureau’s 1-Year American Community Survey
  • Average credit score. Data on average credit scores comes from Experian’s State of Credit Report for 2016.
  • Estimated mortgage rates for credit scores. Data on what mortgage rate is expected to accompany each credit score comes from

We used these metrics to estimate how much homeowners could save on mortgage payments by raising credit scores. We compared how much homeowners would pay for the median home over the course of a 30-year mortgage before and after a 50-point increase in the average credit score. To estimate the mortgage rate, we used the following formula:

Mortgage rate = Credit score * (-0.000114286) + 12.29

Using this mortgage rate, we estimated how much total interest the average resident could expect to pay on a 30-year mortgage for the median home. We then gave each metro area a 50-point increase in the average credit score and calculated the new mortgage rate. Using this new mortgage rate, we calculated the new total interest cost. We ranked the cities according to the difference in total interest costs before and after the 50-point increase.

Tips for Saving Money on a Mortgage

If you are a homeowner, you probably know that by the end of your 30-year mortgage you will end up paying almost as much in interest as you did for the home.

One method to save money on your mortgage is to pay off your mortgage early. This can be done a few ways. One method is to make one extra mortgage payment a year for a total of 13 payments annually. The extra mortgage payment you make will be applied to the loan’s principal not the interest. This means you will pay off your mortgage faster because the principal will be lower, plus you’ll pay less in interest based on that lower balance.

You could also refinance your mortgage to a lower rate or a shorter mortgage. You may quality for a lower mortgage rate especially if you’ve recently improved your credit score. A lower mortgage rate will help you save on interest payments. If you can afford it, it may make sense to refinance to a shorter mortgage, say a 15-year mortgage. This will raise your total monthly payments but will significantly lower the total amount of interest you pay over time

Questions about our study? Contact 

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Derek Miller, CEPF® Derek Miller is a graduate of the University of Edinburgh where he studied economics. He is passionate about using data to help people make better financial decisions. Derek is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He is a data journalist whose expertise is in finding the stories within the numbers. Derek's writing has been featured on Yahoo, AOL, and Huffington Post. He believes the biggest financial mistake people make is waiting too late to save for retirement and missing out on the wonders of compounding interest. Derek lives in Brooklyn.
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