How To Get Credit Scores For The Best Mortgage Rates


credit scores for the best mortgage rates

When you are seeking the best possible rate for your mortgage, your credit score takes on an added level of importance. Your credit score and your credit report are the two main tools that are used to decide your mortgage rate and failure to remain up to date can lead to serious issues later. Here we’ll explain how you can get the credit scores for the best mortgage rates.


A lower mortgage rates equals a lower mortgage payment. It also means lower interest payments during the course of the loan you receive. By improving your credit scores before you apply for an FHA loan, a VA loan or any other mortgage, you can save yourself untold amounts of money, as well as hassle. Read on to learn more.



Credit Scores For The Best Mortgage Rates


Tip 1: Find Out Your Score


It is impossible to determine the effect of your credit score on your mortgage rate, unless you have a strong idea of where you stand. Creating a baseline is the first step towards improvement. The law allows you to obtain a free credit report once year, from one of three different providers: Experian, TransUnion and Equifax. Our partners also provide free credit scores for those who are in need. View your credit score as an annual obligation and be sure to remain up to date at all times.


Tip 2: Know How The Score Works


While it is all well and good to be aware of your credit score, you must also learn about how it works. When making a final lending decision, 90 percent of all lenders will use the score as a crucial factor during the process. There are five categories that a mortgage applicant must be aware of. The types of credit used and new credit each account for 10 percent of your total score. The length of your credit history makes up 15 percent, while the amounts that you owe make up 30 percent. At 35 percent, your payment history is the most crucial factor of all.


Tip 3: Work On Your Errors


A credit report is not infallible and may contain a series of errors. If you do not correct these errors, they are considered fact by your potential lenders. This is why it is so important to remain up to date on your credit score at all times, so that you can find potential errors and fix them as quickly as possible. When you find an error on your credit report, it is your responsibility to contact the bureau that is responsible for the mistake and rectify it immediately. Fixing one error could allow your credit score to rise by as much as 30 to 40 points.


Tip 4: Get Rid Of All Disputed Accounts


Should you locate any errors on your credit report, these are also known as disputed accounts. All of these disputed accounts must be removed from your credit score as quickly as possible, so that you can receive the best mortgage rate available to you. In order to remove disputed accounts from your report, simply contact the bureaus in question and ask them to either resolve the disputes or remove them entirely.


Tip 5: Pay Debts Down


As you now know, payments owed are the most pivotal aspect of your credit score. As such, it behooves you to pay your debts down as soon as possible. When your balances are kept low, this has an extremely positive impact on your credit score and allows lenders to provide you with a much lower mortgage rate. If you have outstanding credit card balances, it is in your best interests to pay them down to within at least of your total overall limit. Doing so is an easy way to bump up your credit score prior to the mortgage application process.


Tip 6: Don’t Pay Bills Late


This should go without saying, but late payment of bills leaves a severe blemish on your credit report, especially when these late payments are not addressed in a timely manner. After a delinquent payment has been added to your credit score, a potential mortgage applicant has precious little recourse. If you are looking to improve your past payment history, annually review your credit report and report errors. It is also important to remember that late payments can cause a credit score that is satisfactory to drop very quickly.


Tip 7: Use Your Credit Wisely


In addition to paying your bills on time, you also want to keep the outstanding balances on your credit cards low. The key to using credit wisely? Only apply for credit when you truly need it. Before applying for credit, ask yourself if the item is a need or a want. Applying for credit in order to obtain an item you want, as opposed to one that you need, is how people end up overextending themselves financially. Keeping a number of revolving credit card accounts serves as a colossal red flag to mortgage lenders and should also be avoided.


Tip 8: Be Careful About Closing Accounts


This one can be a tad tricky, as a mortgage lender is not going to want to see a bevy of open accounts on your credit report. But it is also important to remember that there is a certain ratio that lenders like to see, when it comes to the applicant’s credit used versus their open credit. Closing accounts just before applying for a mortgage can adversely affect a client’s score and when balances on remaining credit cards continue to remain the same, this also causes a much lower overall credit score.


The secret formula to getting credit scores for the best mortgage rates is much easier than financial institutions have led you to believe. By remaining vigilant when it comes to checking your scores, correcting any errors as soon as possible, carefully managing your money and paying bills on time, you can obtain a mortgage rate that fits your financial needs. Simply find out your score and then take the necessary measures to make the improvements needed, so that you make your dream of owning your own home into a reality.

Mike Plambeck

Michael Plambeck, the founder and owner of Home Loans For All, bridges the gap between our content team and our industry team by being an expert in both areas. Michael is a home loan expert who has worked closely with loan officers and realtors for over four years, and who is engaged in constant continuing education to make sure that he’s up-to-date on all real estate laws and regulations.

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