How Credit Score Impacts Mortgage

If you have decided to apply for a mortgage, there are a number of important details you need to go over first. One of these is the term “Credit Scores” which are basically three-digit numbers based on a detailed analysis of your credit reports. These scores establish whether you meet the criteria to obtain a mortgage thus forming the basis of the approval of lending a mortgage. How credit score impacts mortgage is very important regarding what type of mortgage or financing one can quality for. A mortgage lender also uses credit scores to decide factors related to your mortgage such as interest rate, mortgage installments, and amount of loan.

Taking into consideration the significance of these credit scores, legislations have been passed to allow or give users access to free annual credit score reports. Since these reports are usually free, you should keep an eye out for companies that require you to pay for a credit score reports.

How Credit Score Impacts Mortgage

Credit Scoring Models

Credit scores are based on multiple models. However, two of them are most commonly used worldwide. These models are as follows:

FICO Credit Score Model

This credit model estimates your credit score on a fixed range of 300-850 where 300 represents the minimum or lowest credit score, and 850 represents the highest or the best credit score. Most commonly use, many mortgage lenders use FICO scores to determine whether a mortgage applicant qualifies for one or not. While applying for your FICO score, you can choose from three different bureaus. Each bureau uses a different sub-model to calculate FICO scores, so choose one that best fits your needs.

Vantage Credit Score Model

This credit score analyses a user’s credit reports in a different way in comparison to FICO scoring. Instead of assigning you numbers from a given range, it allocates letter grades. Unlike FICO scores, all credit bureaus vantage letter grades represent the same credit scores, which are as follows:

  • A represents a maximum score that is between 901 to 990.
  • B represents a score that is between 801-900.
  • C represents a score that is between 701-800.
  • D represents a score that is between 601-700.
  • F represents the lowest score that is between 501-600.

How does Credit Scoring help customers?

Credit scoring is a major mortgage qualification boost, especially for those who have had a negative credit history and have recently managed to achieve a good or credible credit report.

Ways to Improve Credit Score

Improving a credit score not only increases your chances of qualifying for a mortgage or a loan, but it also provides a possibility for obtaining the best interest rates. For those who are looking for ways to improve or raise their existing low credit scores, some of these tips below might prove quite helpful:

Reach out to your respective credit bureaus and request them to erase incorrect information or records of late payments from your credit files.

Pay and settle unpaid debts and debit card balances to reduce debit from your credit reports, thus increasing your credit.

Follow the above guidelines to attain a good credit score, thus increasing your chances of getting a mortgage approval and a good mortgage policy. For more information on how to improve your credit score in order to better qualify for a mortgage, contact our real estate professionals today!

Credit Scoring Models

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