When you apply for a mortgage loan, your credit score is one of the most influential factors in determining how high (or low) your rate will be. The lower your credit score, the higher your interest rate. A high credit score can get you a lower interest rate and it also determines if you are eligible to receive a home loan at all.
Why does my credit score matter?
Your credit score and financial history determine your eligibility for a mortgage loan. Lenders are more hesitant to lend money to borrowers with a poor history of making on-time payments to creditors. Mortgages are no different. Lenders want to be sure they are giving loans to reliable people who they can count on to pay them back properly and on-time.
What is considered the best credit score?
To receive the lowest interest rates, the ideal credit score would be 760 or above. However, any credit score over 740 is considered the ‘perfect’ range for mortgages. You can still qualify for specific loans with a credit score under 680, but the closer you are to 700 the better. A credit score under 640 might make it difficult to qualify for conventional loans, but there are other options such as the FHA or VA loan for individuals with a credit score of 610 and higher.
How can I improve my credit score?
The most obvious action is to make all payments (including loans and credit cards) on time. Review your payment history and if you see any errors in your credit report, work towards fixing them. If there is a recent late payment, creditors might excuse a one-time offense if you ask for a deletion.
Credit utilization ratio is another cause of many credit score issues. The credit utilization ratio is your debt in relation to the credit limit available. You should strive to keep your spending to less than 30% of the limit on your credit cards. Always try to pay down high-balance credit cards to lower balances.
Whether you don’t qualify for a loan or you’re just trying to get the lowest interest rate possible, there are numerous ways to improve your credit score.
If you’re looking to see what mortgage rates you might qualify for, get in contact with one of our loan officers and call 1-844-77-vLoan to get started today.