When shopping for a mortgage loan, credit score plays a key role in determining eligibility. Therefore, it is necessary to understand the importance of a high credit score when preparing to purchase a home. Lenders decide how likely you will repay your debt based on credit score. Credit scores range from 300 to 850 points based your prior payment history and ability to pay on time. Lenders also consider the total amount of debt you owe which includes credit cards, car loans, and student loans, etc. Having several credit cards increases your liability and tends to reduce the credit score. If you charge more than 30% allowable limit per credit card this will cause your credit score to be lower. Your credit card can be your best friend, but also can become your worst enemy. Using the credit card monthly and paying off the balance monthly is one of the fastest ways to improve your credit score. The bottom line you need to manage your credit card wisely, keeping the balance low and paying off the balance on time, this will create a positive effect on credit score. Having a high credit score will result in getting better loan terms and lower interest rate. Understanding how the credit score system works and abiding by their rules will help you achieve your goals. Regularly get a credit report to check your credit score and work continuously on your credit score to keep it strong. Having a strong credit score means mortgage lenders will provide you better terms, more apt to approve your loan because they have greater confidence the loan will be paid back. Sometimes people confuse the credit report with credit score. These are not the same, the credit score estimates your credit worthiness while the report provides specific information concerning credit accounts such as payment and debt history, etc. Lenders reply heavily on this information because it indicates how likely you repay your mortgage. As borrower you have right to receive a copy of the credit report from each of the three nationwide credit reporting companies once a every 12 months for your review which does not include the credit score. You will be required to pay a fee to include the credit score. At this time, if you discovery inaccuracies this would be the time to make corrections.
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