I think we all are aware that our credit score plays a big role in attaining a mortgage, or not. Lenders check and re-check these scores in the process of determining a loan. Poor credit scores can certainly influence the denial of a mortgage in many cases. Let’s look at how credit scores affect mortgages.
So what exactly are these scores and how are they calculated? Can I get a copy of my scores? These questions are important to ask yourself if you may be considering a mortgage or a refinance of your existing mortgage.
Your credit score, or FICO score is a number anywhere between 200 and 800 generally, which is used to rate you based on a number of criteria. These credit scores are drawn from the main three reporting agencies, Equifax, TransUnion and Exprerian. These reporting agencies simply report what you have done in managing your credit in the past or the new credit you have or want. They look at the type of credit (revolving, mortgage, auto..), length of credit and of course, payment history to issue a credit score based on these factors.
So what does a potential mortgage lender look at to determine a loan for you? How do credit scores affect a mortgage? Clearly, they will want to see that your payment history is decent. It may well factor into how you will pay them. They will also want to see if you have a mixture of credit types that you have managed such as revolving credit, installment loans and even previous mortgage loans. They will also put weight into the amount of credit you have. This can indicate how much in debt you can become should you use all the available credit.
Your credit score ends up being a big part of getting a mortgage. There are other factors such as income, overall debt and others that accompany the credit score to help determine a mortgage for you and even at what interest rate. It is important to know and understand your credit report and your credit score. You can get a copy of your own report for free at Annual Credit Report and I would recommend doing so just to make sure it looks correct and help you make a plan to improve it if needed.
If you are in the market for real estate or considering it, please get in touch. I can help guide you through the process and refer you to my mortgage partners that are experienced and excellent at finding the right financial fit for you and your lifestyle. I can put it all together and help you find the right investment at the right price. Just get in touch and we can go from there.