The following are a few facts about the relationship between mortgage rates and credit scores.
Your Credit Score’s Impact on Your Mortgage Rate
Credit scores can seriously affect your mortgage rate. For example, in recent years 720 has been considered a “good credit score” for those looking to purchase a house. Therefore, if a person had a credit score within the 700 range, they would most certainly receive a much better mortgage rate.
A customer applying for a mortgage with a credit score within the 500-600 range would certainly receive a higher interest rate then someone with an almost perfect credit rating. A poor credit rating is considered more of a risk to most banks and financial institutions. Therefore, the customer may still receive the mortgage however the interest rate will certainly not be as competitive.
Therefore, credit scores not only affect mortgage rates but they can determine interest rates on certain credit cards as well as the terms of certain loans. Prior to applying for a mortgage, it may be wise to obtain a copy of a personal credit report.
Credit reports give the consumer an overall view of their credit standing as well as the overall credit score. Some services are available through the Internet that will actually provide a yearly copy of a credit report for free.
There are also credit services available that will keep track in any changes in personal credit score. Once a change is detected in overall credit score, the consumer would be notified immediately.
High credit scores can certainly secure low interest rates on home mortgages. In addition, decent credit scores can also be quite helpful when a consumer is considering re financing options. The bank or financial representative can explain these options prior to applying for a new mortgage.
A first time mortgage applicant with a high credit score would more than likely be offered an interest rate which may be hard to match. An mortgage interest rate of 2.8-3% would be considered a competitive interest rate available to only certain individuals.