Best Mortgage Rates Go to People with Good Credit
Having good credit can allow you to qualify for the best mortgage rates. It's important to know what kinds of things can hurt your credit score before you apply for a mortgage loan or refinance. The following list of things can negatively impact your FICO score:
- Paying bills late. Payments that are more than 30 days late can lower you score up to 110 points, according to FICO data at Creditcards.com.
- Defaulting on a mortgage or other loan. Not paying bills shows creditors that you are a high risk borrower. Try to work out your financial problems before you end up defaulting.
- Getting accounts turned over to a collection agency. Generally, accounts that go to a debt collector have been charged off and creditors are paying someone else to try and collect the money.
- Having your home foreclosed upon or sold through a short sale. If you have a credit score of 780, mortgage problems that lead to foreclosure lower it 140 to 160 points.
- Filing for bankruptcy. This stays on your credit report for 10 years and can drop your score up to 240 points.
- Debt settlement. Although getting a better payment plan can help you wipe out debt, expect to see your credit score fall by as much as 125 points.
- Charging up to your credit limit. Credit card companies get nervous when you've used up your credit line. Expect your FICO score to fall as much as 45 points.
Mortgage Now or Later?
Don't even think about applying for a new mortgage loan or refinancing without checking your credit score. Your credit report has detailed information about your financial history that mortgage lenders use when deciding to loan money. If your credit score is under 700, you won't qualify for the lowest mortgage rates. Hold off applying for a home loan until you clean up your credit.
