How Credit Reports Affect Your Mortgage
Before you start house hunting and getting pre-approved for a home loan, check your credit report and get your FICO scores. Why? Your credit rating may be the single most important piece of financial information you have to obtain a mortgage at the best interest rate.
Checking your credit rating before you purchase will give you time to correct reporting errors and to clean up your ratings if they are in the dumps. One lender tells us that it can take up to 90 days to get erroneous and costly information off your report, although some prospective borrowers say they have a much quicker outcome.
Errors In Your Credit Reports
Our credit reports contain valid information about where we live, our mode of paying bills-electronic or cash-, our police records and financial sensitivities like being sued, suing someone or declaring bankruptcy. This information is sold to insurance companies, credit lenders, employers and other businesses that use this data to gauge our insurance, credit, employment and housing applications. It is recommended by experts to review credit reports intermittently, some organizations follow this stringently.
Why is there a need to review our credit reports you ask? Simply because:
- The data in our reports affect our chances of being granted or rejected a loan and how much we are willing to pay for borrowing a loan.
- To verify that the information is accurate and up to date and complete. This will minimize complications when applying for loans or jobs or when purchasing houses or automobiles.
- To help protect us against identity theft which is basically when someone uses our personal information such as our name, Social Security number or credit card number to open up new credit accounts. Unpaid bills under this account get reported as ours on the credit record. Such inaccurate information can greatly minimize our chances of getting a credit.
Why Did My Credit Score Drop Possible Reasons
Last Updated: July 30, 2020 You know that its important to have a good credit score, so you do all the right things. Any mistakes you make are short-lived: youre always quick to correct them. Despite this, your credit score should be strong, and you have a pretty good estimate of where it should fall. Read more
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Ask For Lower Interest Rates Higher Credit Limits
The first thing Wayne Sanford, owner of the Texas-based credit counseling firm Credit Bureau Investigations, recommends doing is contacting your current credit issuers to see if they can offer you a better deal.
Call up and say, I just checked my credit score and it was above 780, so why am I still paying this high interest rate? A good chunk of them will drop the rate down for you, he says. And if that doesnt work and youre carrying a high-interest balance, it may be a good time to look into a 0 percent balance transfer card deal, or look into applying for a new, low APR card.
While youre on the line with your credit card issuer, you also can ask for an increase to your credit line. If successful, this is a good win since it can make maintaining a great a bit easier if you tend to carry balances on your cards from time to time.
With a top score, youve already been good about not using too much of your available credit, but a higher limit gives you a bit more wiggle room should you wish to finance a larger purchase over a few months.
Tip:The higher you are up the mountain, the longer the fall, says Sanford. In other words, with a high credit score, even the slightest slip-up can cause as much as a 100-point drop. That said, dont start overspending just because you have a lower rate or a higher limit.
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How To Get Your Free Credit Report
If you want to see your most up-to-date credit score for free, you can now get a free credit report each week from TransUnion, Equifax, and Experian by visiting annualcreditreport.com.
Free weekly reports will be available through April of 2021 in response to the coronavirus pandemic. After April of 2021, youll still be eligible for one free credit report from all three major credit bureaus every year.
You can also track your credit through free credit monitoring services like Credit Karma or Credit Sesame. These wont show your actual credit score, but theyll give you a good approximation based on your payment history, credit utilization rate, and mix of accounts.
One of your credit card accounts may offer free FICO scores or free Vantagescore. Check on the app or website to find out.
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Could Inaccurate Credit Information Be Hurting Your Score
The average credit score for Americans is 703 according to Experian, one of the three major credit bureaus. Experian contributes data to compile your FICO credit score.
On the credit score range, 703 is considered a good score. But its not good enough to have a full selection of loan choices when you need to borrow.
Your good credit could use some fine-tuning if you want a higher credit score.
So lets say youve already built a good credit mix, a good payment history, and an established length of credit history as I described above.
If this is true, you may be wondering whats holding you back from achieving a different credit score?
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Small Credit Changes Matter For Your Interest Rate
Is having a credit score of 820 significantly better than having a score of 780 when it comes to how mortgage lenders look at someone? Not necessarily.
Because of how credit scores are grouped by lenders, some changes in credit arent going to affect your eligibility or rates. While a score of 820 is certainly better than 780, lenders will look at the two qualifying home buyers as credit equals because they fall in the same credit score range.
In many cases, the size of the down payment is the only thing that is going to determine a difference in available mortgage rates for home buyers with comparable creditworthiness.
However, keeping a high credit score is still important.
Each grouping of credit scores has specific mortgage rates assigned by different lenders. This means that you will be offered a lower mortgage rate if you are in a better credit score group. But this grouping method can frustrate some home buyers.
A credit score of 779 is going to be grouped differently than a credit score of 780. Even though they are just one point away, the credit score of 779 is going to be offered higher interest rates while the score of 780 will get the same mortgage rates as a score of 820 would.
This means that raising your credit score by one or two points can make a huge difference.
Excellent Credit Qualifies You For Top
Years before Kevin King, a credit consultant business owner and personal finance podcaster, became known by the moniker The 800 Credit Score Man, the only plastic he could get with his 585 credit score was a JC Penney credit card with a $100 limit. He made improvements over time, and was pleasantly surprised when he took advantage of a free credit score check and discovered it had climbed to 805.
The first thing I did was call my brother because he was the only person in the world who knew how low my score was. It was a great feeling. It gave me a sense of pride, swagger, and I felt that I had clout, he says.
Beyond clout, high credit scorers such as King also gain access to top-notch consumer benefits.
Excellent credit gives you leverage to take advantage of the best kinds of offers that lenders and other businesses might make to get you and keep you as a customer, says Rod Griffin, director of public education for Experian, one of the three major credit bureaus.
Ready to start taking advantage of your top-notch credit status? Here are three big moves you should consider once you join the excellent credit score club.
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Your Fico Score: Just One Piece Of The Puzzle
Id like to conclude this post by offering a little perspective. You may want a perfect credit score, and if you do I suggest you go for it.
But theres more to your personal finance life than perfect credit. Different lenders consider criteria other than your credit history when you apply for a loan or a credit card.
Your debt-to-income ratio, for example, could disqualify you for some of the best credit cards and loan options. This ratio measures how well youre able to pay your current bills with the income youre bringing in.
Your employment history could matter to some lenders, too. Just like with the length of credit history, a longer employment history works in your favor.
If you work to create the most stable personal finance life possible, your FICO score will fall into place, and youll stay at the top of the credit score range.
How Can You Get A Good Credit Score
There are plenty of things you can do to help improve your score, but it can take time and patience, and some will-power too.
Ways to improve your score:
- Register on the electoral roll at your current address. This helps companies confirm your identity.
- Build up your credit history. If you have little or no credit history it can be difficult for companies to score you, which can result in a lower score. Thankfully, there are some relatively simple steps you can take in order to build up your credit history.
- Pay your accounts on time and in full each month. This shows lenders you’re a safe bet and can handle credit responsibly.
- Keep your credit utilisation low. This is the percentage of your credit limit you actually use. For example, if you have a limit of £3000 and you’ve used £1500 of it, your credit utilisation is 50%. A lower percentage is usually seen in a positive light and should help your score go up. To help improve your Experian Credit Score, try to keep your credit utilisation at 25%.
- Sign up to Experian Boost and see if you could raise your score instantly. By securely connecting your current account to your Experian account, you can show us how well you manage your money. Weâll look for examples of your responsible financial behaviour, such as paying your Netflix, Spotify and Council Tax on time, and paying into savings or investment accounts.
Once you’ve got your score where you want it to be, here’s our tips on how to keep it healthy:
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What An 800+ Credit Score Can Mean
The advantages of having an 800+ credit score are huge. Ilene Davis, a certified financial planner with an 800+ credit score, says she did a calculation on the mortgage payments for a $300,000 home loan for various FICO scores.
If the difference between payments for borrowers with the highest and lowest credit scores were invested at 6% a year, at the end of a 30-year mortgage the borrower with the highest credit score would have accumulated around $750,000. Thats a chunk of money worth improving your credit score for.
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Shield Your Credit Score From Fraud
For hackers and identity thieves, people with Very Good credit scores are attractive targets. Your score could enable crooks to open and exploit sizable bogus loan or credit-card account in your name, and then disappear, leaving you to sort out the mess with the lender. To help avoid this, consider credit-monitoring and identity theft protection services. These services can alert you when they detect applications for new credit or other unexpected changes in your credit report.
Consumers reported $905 million in total fraud losses in 2017, a 21.6% increase over 2016 with aan avergae of $429 lost.
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Getting A Mortgage With A 793 Credit Score
At React Mortgage we encompass A to Z lending. Meaning we source solutions and help in any situation when it comes to your borrowing needs:
To start off, a 793 credit score is considered very good. So just keep that in mind as youre shopping around for a mortgage. A lot of borrowers dont know this, but there is no set minimum credit score required to buy a house. Many lenders set their own credit score requirements, which is why it pays to go through a broker instead of a bank. With Banks, you are stuck with them as the lender, but brokers can shop around many, if not hundreds of lenders to find the right one for your situation. Now take your very good score of 793 many lenders would jump at the opportunity to get your mortgage. Its all about finding the right one.
There are other factors that lenders consider besides credit score when looking at your situation. For example:
- How much you have saved for a down payment
- Debts you may have in collections
- What your income level is
- Your overall amount of debt
These factors, along with your 793 score will help lenders determine what you are eligible for when it comes to a home loan. Now for your score, wed recommend to shop around for your best rate. Many lenders will compete for your mortgage at your credit score.
Remember, your 793 is made up of the following 5 things:
- Payment History 35%
- Type of Credit 10%
Whats In A Credit Report
A credit report includes:
- Who is examining your credit. Any inquiries by lenders or others about your credit is recorded as well.
- Any judgments against you, such as bankruptcy.
- Personal information about you, such as your addresses , Social Security number and your previous employers.
- A section for comments by you, in the event you have disputed the report specifics in the past.
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A Quick Guide Explaining Credit Scores Including How They Work What Range Is Considered Good And Why Theyre Valuable
- FICO says good credit scores fall between 670 and 739. Thatâs on a scoring range from 300 to 850.
- VantageScoreâs good scores are reported to fall between 661 and 780, also on a 300â850 range.
But thereâs a lot more to it than that. So keep reading to take a closer look at credit scores, including how theyâre determined, whoâs looking at them and what you can do to monitor and improve yours.
How To Improve Your Credit Score From 793 To 800+
A credit score of 793 is on the brink of perfection, and you probably wont have to change much to join the 800+ credit score club. Your personalized credit analysis from WalletHub will tell you what needs improvement and exactly how to fix it.
A few things in particular tend to stand between a credit score of 793 and perfect credit, though. And if you do nothing else, make sure to take the following steps.
Read Also: How Accurate Is Creditwise Credit Score
Auto Loan Rates For A New Car 790 To 799 Credit Score
Dont be tricked into applying for the advertisements promising unbelievably low APR percentage rates on your next new car auto loan.
Those rates only exist theoretically and in our research are only given to a small group of members with large investment savings held by the bank, not based on credit score.
If you inquire they will tell you that they are sure you qualify but will have to double-check.
But it gets worse!
Most of these companies are using practices to lure you in and charge you a much higher interest rate than what you could have gotten from a reputable lender.
It is impossible for a lender to even guess what interest rate you will qualify for until they perform a soft pull on your credit records and see your credit score.
The interest rates we use in our sample auto loan monthly payment charts, are current rates for super prime borrowers, like you, with credit scores in the 790s, such as 792, 793, and 797.
If you have a credit score in this range than this article was written just for you!
If you have a credit score around 792 to 795, it is considered a super prime credit score, which includes ranges from 780 to 850.
Generally, all people in this credit range will be offered similar interest rates.
As you move into the super prime market with your credit score rising to 790 to 850, you would be eligible for the absolutely best rates.