Credit Scores and Your Mortgage

August 30, 2014

Real Estate

Credit Scores and Your Mortgage

credit scoreI am frequently asked, do I need a good credit score when taking out a mortgage?

A good credit score will mean that you qualify for the best loans, rates and terms.  This great advantage will gradually save you money through reduced rates over the lifespan of a loan.

As an example, a credit score of 620 or below would mean that the person looking to borrow would be categorized as a “sub-prime” borrower, whereas a credit score of 720 would mean that the borrower would be eligible for more favorable loan conditions.

Here are some simple tips to repair your credit score:

1. Get a credit card from a major company.  Before you go crazy, it is important to note that using a credit card and keeping a balance on one are two totally different matters.  Experts suggest using it for things like gas that you will pay off on a monthly basis.

2. Get a prepaid credit card.  If you don’t trust yourself to use a credit card wisely or just don’t want one, then you should get a prepaid credit card.  This gives you a way to use a credit card without the temptation of running up debt.

3. Be patient.  Although it is difficult, it’s important that you understand the process of repairing you credit won’t happen overnight.  Slow and steady wins the race when it comes to your credit score.

4. Check your credit score.  It is very important that you understand that your credit report is accurate.  So, checking the three credit bureaus on a regular basis is wise.  These include Equifax, Experian and TransUnion.  You want to know if anything incorrect is on your credit report so you can fix the situation before it damages your credit.

Source:  The Real Estate Book

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