Useful Tips 2 - The Effect of Your Credit Score
The Effect of Your Credit Score
If you have read our last article about credit cards, we have spoke about various credit card types like Visa, MasterCard, American Express and their different features in that article. In spite of these different features, there was one very important common point with all these different types of credit cards : credit score. You should have a good credit score before you can get any type of credit or credit card.
For mortgage lenders, your credit score is a very important sign to know if you will be able to pay back your mortgage loan. As long as you pay your monthly fees regularly, there should be no problem with your credit score. As long as you have a high credit score, your interest rate will be low. It is safe to say that there is an inverse ratio between your interest rate and mortgage loan interest rate.
Credit Score - Mortgage Relation
There are various credit score levels which can determine your mortgage loan rate. For example, if your credit score is lower than 650, it is very likely that you will be considered as a risky customer by bank or financial corporation. That automatically means much higher interest rate than the average. On the other hand, if your credit score is over the level of 780 you will become a much better customer in the eyes of the bank or financial corporation. That leads to much lower interest rate for your mortgage.
So it is obvious that your credit score is very important when you are going to apply for a mortgage credit. But what can you do to increase your credit score? First of all, it has to be mentioned that increasing your credit score is usually a long term investment and it is not easy to increase your credit score immediately. However it is not impossible at all, there are various important things you can do to increase your credit score.
How to increase your credit score?
First thing you can do is to pay your current debts as soon as possible. It is understandable that you might not have enough cash to pay your current debts at once. In this case, even paying monthly fees for your debts regularly would be a big plus and automatically provide a better credit score for you. Also you can use credit cards or debit cards for your daily payments and pay your monthly card fees regularly. If you are going to practice this, try to use your currently available credit cards. If you apply for getting new credit cards, your credit score can decrease for a specific period of time. Also rejected credit card demands hurt the credit history as well.
It is always a good practice to check your credit history and previous credit reports. This would allow you to know if there are any mistakes and if there really are, you should go and correct them before applying for a mortgage loan.
Your Savings Matter
It is a very good practice to save a reasonable amount of your monthly income for your future. This practice works pretty well in the context of mortgage loans too. As the amount you save in your bank account increases, you will automatically become a better and less risky customer in the eyes of the bank. That can reflect to interest rates of the mortgage loans. Another fact is that, as your saving increases, the amount you need as mortgage loan will automatically decrease. So you will need to ask for a smaller amount of mortgage to your bank. That also automatically increases the possibility of approval of mortgage credits
General Information About Mortgage Loan Main Types of Mortgage Loans Useful Tips for Qualifying for a Mortgage What About Your Total Expenses?