Why does your credit score matter? How can you improve it? Where do you even begin?
All of these questions are important to ask if you’re considering buying a home. To qualify, a minimum credit score may be required depending on the overall loan profile. The higher your credit score, the more likely you are to qualify for a mortgage loan and potentially get better terms and lower interest rates, which can result in significant savings over time.
Your credit score may also make a difference when considering the amount for a down payment. The lower the credit score, the greater the risk the lender is taking. To mitigate that risk, the lender may ask for a higher down payment.
Think of your credit score as a gauge of the likelihood that you will repay money that you borrow. Many lenders look at your FICO® Score, developed by Fair Isaac Corporation, when you apply for a home mortgage (or any type of loan) to decide whether to extend credit and what the interest rate will be. Lenders may use the median, or middle, score from the credit scores reported from Equifax, TransUnion and Experian.
Improving your credit score can take some time. However, don’t be intimidated by the process. The quicker you acknowledge any issues with your credit score, the sooner you can work on improving it (and the quicker you could be in your new home with a mortgage that works for you).
For more about mortgages and credit scores, visit elevationscu.com/mortgageblog.