Improving Your Credit Score and How It Affects Your Mortgage Rate

When you start looking for your new Fort Lauderdale mortgage, your credit score is a leading factor that will impact the rate that the lender can offer you. When your score is higher, it often allows the lender to provide a lower rate quote. Before you start to look at homes, it is a good idea to check your credit score. If you pull your full report, you will be able to handle any issues before you apply for your mortgage allowing your lender to offer you the best mortgage rates.

What Should My Credit Score Be for a Mortgage?

Most lenders utilize the Fair Isaac Corporation (FICO) credit rating system. This model of grading credit scores uses a point-based system ranging from 300 to 850. The higher the point rating you have, the better the lender feels about taking a risk on you. Typically, lenders view an 800 or higher as exceptional; scores that range from 740 to 799 are excellent; ratings of 670 to 739 are considered good; 580 to 699 points are fair; lastly, a score of 579 or less is a poor credit rating.

Individual lenders set the standard that a borrower has to meet to get the best interest rates. Even just a few points higher on your credit rating can affect the amount that your mortgage could cost you overall. No specific credit score is required to get a mortgage, however the higher your rating, the lower your interest rate.

How to Improve Your Credit Score

If your credit rating could stand a little improvement, you can take some steps to help it before you apply for your mortgage. Here are a few things that can assist you with your score.

Check your credit score and fix any of the errors that are on it

Most people don’t know that there can be mistakes on your credit report. Often there will be items that needed to be removed and were not or an institution could have reported something in error. It is always a good idea to look over your report and make sure that all the claims on it are correct.

Pay towards the credit card balances that you have.

When trying to improve your credit score, it helps to have your credit card balances below 30 percent of whatever your maximum limit is.

Make sure to pay bills on time.

Most lenders will pull your payment records for the last 6 to 7 months. This means that you want to make sure to pay your bills on time. You do not want that report to show any late or missed loan payments, rent payments, car payments, or any other type of transaction that you make.

Avoid closing out current credit accounts.

Once you have paid off older credit accounts, hold off on closing them out. Showing that you have that available credit helps your debt to income ratio and your credit score.

No new lines of credit

Try to avoid starting any new lines of credit. Every time that you open a new credit line or take out a new loan it adds a ding to your credit report and lowers your score. Also, loans and large purchases will raise your debt to income ratio.

Once your credit score is as high as you think you can get it, you will want to shop for your mortgage rate in one 30-day period. This makes sure that all of the credit inquiries take place with less of an effect on your credit score.

Mortgages With a Lower Credit Score

If your credit score is beyond what a few tips and tricks can do to get it in shape before you apply for a mortgage, don’t despair, you can still get a mortgage without a perfect score. Keep in mind that often a lower credit rating does translate to a higher interest rate; however, there are programs created specifically for people with lower incomes or below average credit scores. You will want to talk to your lender to see what programs they offer.

Kloze and Your Mortgage

NHL Lending offers some of the best mortgage rates in the Fort Lauderdale area. Our loan specialists are trained to help you get the loan type that works best with your needs and your credit score. We offer loan varieties for many areas on the credit spectrum and different income levels as well. You can start your home search off by getting a pre-approval through the Kloze Home Loan web page or contact us today, to speak with one of our many staff members waiting to assist you. We know that you need to be comfortable with the financial choices you make. Our team wants to help you get the home that you deserve.