How Does Your Credit Score Relate To Your Interest Rate?

What is a credit score?

 A credit score is a three-digit number that relates to how likely you are to repay debt. This rate is very important when it comes to loan approval. There are three main credit bureaus – Equifax, Experian and TransUnion. These credit companies create your credit reports. When you are applying for a loan, your lender will pull reports from these three companies to help determine your credit worthiness.   

How is a credit score created?

Your scores are based mostly on how often you make your payments on time and if your accounts are in good standing. Some other factors include debt to income ratio, length of credit history, credit limits, if you are you maxing out your credit availability, hard inquiries, and what other credit you have. Personal information such as - race, gender, religion and marital status will NEVER be factored in.

How does a credit score affect your mortgage rate?

Your credit score relates directly to the interest rate you will receive on your loan. The higher your credit score, the lower your interest rate will be.  A high credit score indicates that you are the most likely to pay back your loan in full and on time.

Each loan program has different credit requirements. Do not be discouraged if you do not have the highest credit score; we can find something that will work for you!

 

Source: nerdwallet.com


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.