June 14, 2017
Your credit, your credit scores, and how wisely you shop for a loan that best fits your needs have a significant impact on your mortgage interest rate and the fees you pay. To improve your credit and your chances of getting a better mortgage, get current on all of your monthly payments and stay current. About 35% of your credit scores are based on whether or not you pay your bills on time. About 30% of your credit scores are based on how much debt you owe. That’s why you may want to consider paying down some of your debt.
Get your credit report at annualcreditreport.com and check it for errors. If you find mistakes, submit a request to each of the credit bureaus to ask them to fix the mistake. For more information about correcting errors on your credit report, visit consumerfinance.gov/askcfpb.
If your credit score is below 700, you will likely pay more for your mortgage. If you work to improve your credit and wait to buy a home, you will likely save money. Sometimes the savings may be $50.00 to $100.00 per month on a typical mortgage payment. That adds up over the life of the loan. An average consumer who adopts healthy credit habits, such as paying bills on time and paying down credit card, could see a credit score improvement in three months or more.
Here are two tips of how your credit score may affect your mortgage:
1. Be careful making any big purchases on credit before you close on your home. Even financing a new refrigerator could make it harder for you to get a mortgage.
2. Correcting errors on your credit report may raise your score in 30 days or less. It’s a good idea to correct errors before you apply for a mortgage.