It is well known that you can hardly get the best mortgage rates without a good credit score, which means you will end up paying a lot more interests over the term of your mortgage. Even the difference between 0.25% can add up, especially for a 30-year mortgage with fixed rate. The impact of difference in the rates doesn’t seem significant at first, but years after years, you could be paying much more than others with better rates.
Why a healthy & strong financial history, along with a high credit score, can get you a low mortgage rate?
Are you ever hesitant to lend money to friends who takes forever to pay you back or even never pay you back? Well, when it comes to mortgage, lenders feel the same way as you do. They are more likely doing business with people who have good records with on-time payments to creditors.
A high credit score tells lenders that, you’ve been good on meeting your obligations like car loans, credit cards or any other loans in the past, which means lenders are more likely to give you a loan since they know you’re gonna pay back on time. A good score is one of the most important factors to qualify, but that is a part, you also need to have the whole package such as income, credit, other assets etc.
Typically, a score of 700’s can get you a pretty good interest rate, and that’s where you should aim in order to pay the lowest rates. Here are some useful tips to improve your credit score:
- Rule No.1 – Always make payments on time, including loans, credit cards, rent, bills etc.
- Check for errors on your credit report and try to fix them
- Keep your credit cards spending lower than the limit, like no more than 30%
- Work with credit counselors or lenders to improve your scores.