How Does My Credit Score Affect My Mortgage Rate?
Your credit score is one of the most important factors in determining your ability to buy a house and this includes your rate, down payment as well as the programs you are eligible for. The rate has a significant impact on your payment and the price of the house in which you can qualify. The difference in payment between 4.0% and 4.5% on a $200,000 mortgage is about $60 per month and over $21,000 over a 30 year mortgage term. Consequently, it is very important to have the best score possible so that you pay the least amount of interest. If you have other questions about this, we specialize in helping people with all scores in Columbia, Lexington, Blythewood, Chapin and all of South Carolina.
What is a Good Credit Score?
There are three credit bureaus that determine the score used to qualify for a mortgage. Those three bureaus are Transunion, Equifax and Experian. Mortgage Consultants use the middle score of the three. For example, if your Transunion is a 700, Equifax a 620 and Experian a 680, then the 680 would be used to determine your rate and eligibility. The range of scores is between 300 and 850 with the higher the score the better. Generally speaking, a credit score over 780 is considered excellent, a credit score between 740 to 779 is very good, credit score between 680 to 739 is good, 640 to 679 is fair, 580 to 639 is okay, and below 580 is poor. However, it is fairly easy to improve from one category to the next with little effort and can be done in a short period of time. Also, different programs have different requirements and some programs consider lower scores acceptable.
Is a Good Credit Score More Important For Certain Types of Loans?
The short answer to this question is yes. For Conventional Loans, it is extremely important that your credit scores are at least a 680 to increase your chances of approval and require the least amount of money down. However, if you are interested in a FHA Loan, VA Loan, or USDA home loan, your credit scores can be as low as 620 and with some programs below 600 is acceptable, especially with a FHA Loan. So, even though some people may consider a 620 score okay, there could be several loan options for you. Keep in mind that good credit scores are always important when qualifying for a mortgage and determining your mortgage rate, but there are usually mortgage options with lower credit scores.
Ways to Boost your Credit Scores
As was mentioned earlier, it can be fairly easy to improve your scores. Below, is a list of steps you can take to improve them.
- Pay down your credit card balances below 30% of the credit limit.
- Stay away or pay off any existing finance company accounts. These loans are considered high risk and can cause a decrease in your scores.
- If you don’t have any credit cards, open one. If your scores are too low to qualify, look for a secured credit card. This is easier to qualify for and is less risky for the bank.
- Make sure you pay all accounts on time.
If you would like more information and assistance in improving your credit score, please give us a call at 803 261 9267. We specialize in helping people with all scores in Columbia, Lexington, Blythewood, Chapin, Sumter, and all of South Carolina.