How Your Credit Score Affects Your Mortgage

Did you know that your credit has a huge impact on your mortgage? Many people do not make the connection between the two until it is too late. When you apply for a loan the lender will go over your credit history from one end to the other.

Much of their attention will be on your credit report. They will look at everything you have ever paid for combined with how you made your payments each month and whether it was good or bad. Your credit score will have a large impact on the type of mortgage you qualify for, the terms of the contract you are offered and the interest rate you will be required to pay.

What Does Your Credit Score Say About You?

Your credit score says a lot about you. It tells the lender how responsible you are when it comes to your debts. The credit report will provide information about your past debts and whether or not they were paid on time every month.

Missing or being late on just one payment can send a negative signal to a mortgage lender. Of course, something this small will not stop you from receiving the loan but it gives you an idea of how everything you do affects your options later.

Credit reports will also show if you have ever filed for bankruptcy or if you have debts that where never paid. The lender will use the credit report to determine your credit score. Your credit score will be used to determine if you qualify for the loan and if so, the terms of the loan.  

Understanding Your Credit Score

Understanding your credit score and how it affects everything you do will help you when it comes to applying for a loan. Credit scores range between 300 to 900 and the higher your score the better your credit. The average person falls somewhere in the middle around the 600 mark. The longer you have been using credit the more will be on your credit report.

If you have always paid your bills on time each month then you will have a really good credit score. If you have payments that have been late or bills left unpaid you will have a bad credit score. The more bills paid late the worse your credit will be.

When you apply for a loan the lender pulls up your credit report and looks at everything you have paid on. Past loans and how they were paid will be on this report. If you have any outstanding debts for anything including utility bills and telephone bills, these will be on there as well.

How the Lender Determines Your Credit Score

The lender factors together all the information from your report and comes up with a credit score. This is what they will use to determine the terms of your loan. Your available credit is the amount that you have on credit cards and so forth that you have access to. Normally, the more you have the better the lenders view it. However, if all of your credit is maxed out this will look bad and you will be considered a high risk, which is not good.