Your Mortgage Credit Score - Know it Before Your Lender Does
Are you currently in the market to buy a new home? Do you have extensive credit card debt? You'll want to turn that around as quickly as possible.
Your debt may be affecting your mortgage credit score more than you think.
When you apply for a home, your mortgage credit score will play a large role in whether you're approved, as well as the interest rate you'll have to pay if you are approved.
Lenders use this number to determine your dependability.
If you've managed your credit cards responsibly, it's likely that your score is high.
This means you've paid your bills in full or at least made the minimum payment, you've done so on time, and you don't carry high balances that push close to your available limit.
If you have a history of late payments and/or you're constantly running up a high balance, your score will be low, and your lender can tell that you've had these financial issues just by looking at your score.
They will be more wary of you-if you've missed payments on your credit cards, you may be more likely to miss mortgage payments, and that involves the serious consequence of foreclosure.
That's bad for both parties.
You may obviously feel more pressure to make sure you meet your mortgage payment than you do with your credit cards, but your lender won't take the risk based on your history.
If they do approve you, they'll attempt to decrease the risk of foreclosure by increasing the interest rate on your loan.
This way, they'll be sure to get more of their investment back no matter what happens.
The solution is simple.
Pay your bills on time.
If you can pay them in full, great, but at least meet the minimum payment.
Keep your balances low.
The higher your balances, the more you appear to be a frivolous spender.
Your mortgage credit score helps to take much of the potential for personal bias out of the equation when you apply for your home, so even if you're really not a frivolous spender in that case, it won't matter to your lender.
Keep your score high to keep yourself in control of how they perceive your ability to repay your loan.
Your debt may be affecting your mortgage credit score more than you think.
When you apply for a home, your mortgage credit score will play a large role in whether you're approved, as well as the interest rate you'll have to pay if you are approved.
Lenders use this number to determine your dependability.
If you've managed your credit cards responsibly, it's likely that your score is high.
This means you've paid your bills in full or at least made the minimum payment, you've done so on time, and you don't carry high balances that push close to your available limit.
If you have a history of late payments and/or you're constantly running up a high balance, your score will be low, and your lender can tell that you've had these financial issues just by looking at your score.
They will be more wary of you-if you've missed payments on your credit cards, you may be more likely to miss mortgage payments, and that involves the serious consequence of foreclosure.
That's bad for both parties.
You may obviously feel more pressure to make sure you meet your mortgage payment than you do with your credit cards, but your lender won't take the risk based on your history.
If they do approve you, they'll attempt to decrease the risk of foreclosure by increasing the interest rate on your loan.
This way, they'll be sure to get more of their investment back no matter what happens.
The solution is simple.
Pay your bills on time.
If you can pay them in full, great, but at least meet the minimum payment.
Keep your balances low.
The higher your balances, the more you appear to be a frivolous spender.
Your mortgage credit score helps to take much of the potential for personal bias out of the equation when you apply for your home, so even if you're really not a frivolous spender in that case, it won't matter to your lender.
Keep your score high to keep yourself in control of how they perceive your ability to repay your loan.