Credit Scores And Mortgage Loans - Information To Be Aware Of

A credit score is a numerical representation of one's likelihood or capacity to pay back a loan or money borrowed

. It is based primarily on previous payment history, time length of credit history, the frequency of applications for credit, the mix of credit types, and of course one's current debts.

You will find that it is frequently called a FICO score, which stands for Fair Isaacs Corporation, who are the people who developed the program that makes the rating number. Your credit rating is the single most important factor when applying for a loan.

It would serve a good purpose to be properly updated with your credit score when trying to apply for a mortgage financing. It is recommended that you obtain your credit report and credit score form TransUnion, Equifax, and Experian six months prior to application to ensure your credit status is in order and eliminate errors that would result in a low credit score.

The importance of one's credit score when applying for a mortgage cannot be overstated. Banks and other lending institutions will look at this score when they review your application.

Usually, credit scores of 760 and above are considered the top tier scores. Having high scores mean that lenders will be more willing to give you better deals such as lower interest rates and more choices on your loan, which will translate to bigger savings down the road.

If your credit rating is below 620, then you are what they call subprime. This kind of score will mean that even if you do get the loan, the conditions will be more harsh.

Having a low credit score does not automatically mean that one is disqualified from getting mortgage financing. Some lenders will look into other factors aside from the credit score like salary and savings, and will also request for more documents such as bank statements, on top of the higher interest rates.

When it comes to applying for loans, improving your credit score can benefit you in many ways. By bringing your current credit down and paying off other outstanding debts can have a dramatically strengthen your credit score.

by: Brian Rice.

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