Are you about to apply for a mortgage loan in order to buy a home? If so, you may be curious about your credit score and how this might impact your financing.
Let’s take a quick look at how FICO credit scores can affect your
mortgage and share a couple of ways that you can boost your score to
ensure your application is approved.
What is a FICO Score?
The Fair Isaac Corporation (FICO) is the country’s leading producer
of credit scoring information and is the primary source that most
lenders will check to assess how much risk you present. FICO combines
information from credit bureaus such as TransUnion, Experian and Equifax
and produces a score ranging from 300 to 850.
The higher your FICO score is, the better your credit history and the
lower the risk you present to lenders. If you have a score above 750
you can expect that most lenders will offer you a mortgage and likely a
very good interest rate. If you have a score below 620 or 630 you may
find it challenging to get approved and below 500 it will be almost
How Does a FICO Score Affect My Mortgage?
Your FICO score will affect you in two main ways. First, as mentioned
above your FICO score will help to determine whether or not you are
approved for a mortgage. Second, you’ll find that the interest rates
offered to you by various lenders will change based on your FICO score.
An individual with a score of 800 and very clean credit presents much
lower risk than someone with a score of 500, and thus a higher score
generally means a lower rate.
How Can I Boost My FICO Score?
If you find that your credit score is a bit low and you’re concerned
that it will have a negative effect on your mortgage application there
are a few steps you can take. First, get a full copy of your FICO score
and credit history so you can see who is reporting to the credit bureaus
and what information they are providing. You may find that there are
mistakes or old items that have not yet been removed which you can then
challenge to have taken off of your credit report.
While your FICO score can certainly impact your mortgage and your
interest rate you shouldn’t let a low score hold you back from applying.
Contact your local mortgage professional today to discuss your options
and to determine whether or not your credit will cause you to have any
issues in securing a mortgage to pay for your new home.