Your credit score is key to getting a mortgage—especially getting a mortgage from a prime lenders who offer the best rates.
If you’ve had credit card troubles in the past and are worried about your upcoming mortgage application, here are four things you need to know:
You can check your credit score
Your credit score is a number from 300 to 900, calculated by a credit bureau and based on your credit report.
Your credit report is a summary of your credit history. Your credit history begins when you apply for credit, or borrow money. It includes information on your debts, including how often you miss payments, or if you go over your credit limit. Your credit history will also include any bankruptcies. As your financial history changes, your credit score will change.
If you’re applying for a mortgage, your lender will check your credit score. You can also check your credit score yourself by contacting the credit bureaux Equifax or TransUnion, although there is a fee for doing this.
You get the best mortgage rates with a high credit score
The higher your credit score, the better the mortgage rate you will be offered. Scores of 680 and above should secure you a prime lender, who are lenders with the most conservative lending requirements but who offer the lowest rates.
You can get a mortgage with a low credit score
Even if your credit score isn’t currently in a good place, you can still get a mortgage! But chances are if this is the case, you will be dealing with trust companies or private lenders. Some private lenders offer rates as high as 18 per cent, as a low credit score makes you a high risk.
If you have a low credit score, you will probably need a larger down payment before being offered a mortgage.
You can improve your credit score
Whatever your number, you can improve your credit score.
Your credit score is based on your payment history. If your score is low, you can take steps to improve it by paying all your bills on time. If you think you won’t be able to make payments, you should get financial advice immediately. Contact the lender to make an arrangement for repayment. You may be able to consolidate your loans.
Your credit score is also based on your credit utilization. The greater percentage of available credit you use, the higher your risk and the lower your score. You can also improve your credit score by using no more than 35 per cent of your available credit.
Whether your credit score is favorable or not, Northwood Mortgage™ has options available for you. Contact our team to see how we can help!