A loan pricing grid is a matrix that sets the interest rate spread above a benchmark (Prime Rate or SOFR) based on a borrower's risk profile — typically FICO band, Loan-to-Value (LTV), and Debt Service Coverage Ratio (DSCR) tier. Higher risk = wider spread = higher borrower rate.
Loan pricing grids operationalize risk-based pricing: the principle that higher-risk borrowers should pay more, and lower-risk borrowers should pay less, for the same product. Banks and non-bank lenders build grids with two to four risk dimensions. ## Common Grid Dimensions FICO band: Typically segmented in 20-40 point bands (e.g., 720+, 680–719, 640–679, below 640). Each band adds incremental spread — for example, a 720+ FICO might get Prime + 1.75%; a 640–679 FICO gets Prime + 3.25%. LTV: Lower LTV (more equity/collateral) earns a spread reduction. An SBA 504 deal at 80% LTV may price 50bps tighter than one at 90% LTV. DSCR tier: A DSCR above 1.50 may earn a 25bps reduction vs. a DSCR of 1.20–1.30. The Federal Reserve's guidance on risk-based pricing and ECOA/Regulation B compliance requirements shape how grids must be applied consistently across borrowers. ## Fair Lending Compliance Loan pricing grids must be documented and applied consistently to comply with ECOA (15 U.S.C. § 1691) and Regulation B. Discretionary exceptions that deviate from the grid must be tracked and monitored for disparate impact across protected classes. Regulators use exception logs during fair-lending examinations. ## Practical Use Knowing that a pricing grid exists allows borrowers to target pre-application improvements: raising FICO from 674 to 682 can cross a pricing band and reduce rate by 50–100bps. Similarly, reducing LTV below a grid threshold (by increasing the down payment) can unlock a materially lower spread.
Yes, but within limits. Banks typically allow 'exceptions to policy' (ETPs) for compelling files that fall slightly outside grid criteria. These exceptions must be documented and approved at a higher credit authority level. Frequent exceptions in one direction can trigger regulatory scrutiny for fair-lending violations, so banks manage their exception rates carefully. The best leverage is improving your file to qualify within the grid on merit.
Lenders do not publish their proprietary pricing grids externally. However, the rate quote you receive at pre-qualification reflects your grid position. Request an itemized explanation of your rate — specifically which risk factor(s) caused any spread above the base. That answers which grid dimension has the most room for improvement.
Yes. Risk-based pricing is legally required to be consistent and non-discriminatory. Under ECOA and Regulation B, lenders must price based on creditworthiness factors (FICO, LTV, DSCR, collateral), not protected characteristics (race, gender, national origin, etc.). Disparate-impact analysis — where grid application produces statistically different outcomes across protected groups even without discriminatory intent — is also monitored by regulators.