After years of good credit and financial management, you can find yourself with a credit score of 800 or higher. FICO scores range from 350 – 850, so when you get above 800, you know you’ve been doing a lot of things right. One of the biggest benefits that come with an outstanding credit score can be had in the savings on a home mortgage. Higher credit scores can lead to lower monthly payments that can end up saving you a lot of money over the life of a mortgage. Plus, have good credit makes the entire home buying process quicker and easier.
A high credit score always makes you more attractive to lenders. It makes the loan approval process easier and opens the door to lower interest rates. Excellent credit also gives you more negotiating power when it comes to closing costs and other fees.
Why Your High Credit Score Gives you Leverage
Even if your credit score is in the 700’s, it will help you get a lower mortgage rate. Many loan programs have a minimum credit score requirement to be approved for a mortgage. Most lenders require a credit score of 580 to get approved for an FHA loan, for example. Other programs, like USDA mortgages and conventional loans, will require at least 620.
Your credit score isn’t the only criteria mortgage lenders consider when determining your interest rate, but it’s a big one. Ultimately your mortgage rate is determined by your down payment, your debt-to-income ratio, current mortgage rates – and your credit score.
Small Changes can Affect Your Interest Rate
Having a credit score of 820 is not significantly better than having a score of 780 when it comes to how a lender will evaluate you. Because of how credit scores get grouped by lenders, some changes in credit aren’t going to affect your eligibility or rates. While a score of 820 is unquestionably better than 780, a lender will likely look at both scores as credit equals because they fall in the same credit score range.
Each grouping of credit scores has specific mortgage rates assigned by different lenders. The grouping method can be frustrating at times when you’re right on the edge. For example, a credit score of 779 is going to be in a lower group than one of 780. Even though they’re only one point away, the 779 score will get offered a higher interest rate while the 780 will get the same offer the 820 buyers gets. So just raising your score by one point can make a huge difference in the long run.
Prepare Your Credit Report
If you’re getting ready to apply for a home loan, you’ll want to request your credit report from the major credit bureaus. This will give you a chance to correct any potential mistakes in your report. While you’re going through the home buying process, avoid making big purchases and opening new credit cards. Try to pay off all of your debt, and get your credit limits increased to improve your credit utilization ratio.
Every little change matters to you getting the best mortgage rate. A one point change can end up saving you thousands of dollars over the life span of your loan.
Need Help with Credit Repair?
Navigating the world of credit repair can be frustrating, especially with all the laws and regulations that seem to be constantly changing. It’s a full-time job to keep up with everything. If you need help repairing your credit and cleaning and raising your credit score, working with an experienced credit repair company is the fast way to get your credit back on track.
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