How Credit Scores Impact Your Interest Rate


We should all make sure we look after our finances, especially when a home purchase is on the horizon. Your financial well-being can have a huge impact on the interest rate you'll end up paying on your mortgage. Most lenders, whether U.S.-based or not, are going to check your financial status before they even start talking about prevailing mortgage interest rates. In other words: Your credit score really matters!

It all starts when you get your first job or credit card. These days, many leading credit agencies take into account credit cards controlled by parents, as well. As long as your credit card has your name on it, you will have started what can only be described as your "credit career." It's vital to look after your credit if you want to pay less for future loans such as mortgages.


Your credit score can have a dramatic effect on being able to achieve the lowest home mortgage interest rates. While interest rates are a key component in choosing a lender, don't think for a moment they are the only criteria. A lender's personal service and attention to detail are also vital. Your mortgage brokers should be knowledgeable and be able to answer important mortgage questions with ease.

To make sure you can enjoy the best interest rates when you take out a mortgage, there are some factors that are more important than others. The first one may seem like a rather quirky one: Believe it or not, it is a good idea to have some kind of credit agreement. It doesn't matter if it's a credit card or auto loan. A prospective lender may not even look at the amount of the loan, but they will certainly make sure that you have been making payments on time.

Late payments are red flags to any lender. Make sure you're fully committed to any loan you take out, and you can afford to pay it back.Being fiscally responsible is a staple of homeownership—and your credit card balances are loans. Another crucial consideration is making sure you maintain your income level. This is another thing lenders will take into account when granting loans.


It's highly advisable to check your credit report at least once a year. You can actually check your credit score for free once a year with each of the three major credit bureaus: Equifax, Experian and TransUnion. It's easier than ever before for someone to "borrow" your credits core. Make sure all of the information is correct. If you notice something suspicious, you need to contact the credit agency as soon as possible. Mistakes or fraud can certainly impact your score.

It can be tempting to think that not borrowing any money will make you the perfect candidate for a low-interest mortgage. Unfortunately, this is not true. Lenders are anxious to see a credit score, and without any credit information, you're likely to end up with a bad interest rate. Unfortunately, not all lenders tell you about the factors that can influence your credit score. Card surfing or changing credit cards often in order to pay off balances will not do you any good. You may not be aware of this, but when you apply for almost any financial product, a lender will check your credit report. If you do so a couple of times over a 12-month period, it can adversely affect your credit score, so don't be fanatical about checking every few months.


Do you want a 30-year or 15-year mortgage? Should you go for a fixed- or adjustable-rate loan? Is there a special mortgage program that you qualify for, such as a VA or FHA loan? These are all vital questions to ask a lender. The answers will determine a significant portion of your financial future with owning a home, so put the necessary time in to make the best choice.

Buying a house is a significant step in one's life. Doing so with a sound financial plan will make things go a lot smoother with significantly less stress. Proper planning will help make your goal of home ownership a reality with far fewer headaches.Do your best to make sure your credit scores are sound. Best of luck when the time comes to purchase a home!

source: RISmedia