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Mortgage rates and your credit score

[Apr 27, 2011.]


If you are a prospective homebuyer, you may be surprised to learn that your credit score is one of the most important factors in determining not only whether you will qualify for a loan, but also the rate you will pay. The lowest mortgage rates are only available to borrowers with the highest credit scores. Typically, lenders are looking for a credit score of 740 or higher in order to offer the lowest interest rates. Borrowers with a credit score between 620 and 740 will pay higher interest rates from one-eighth to one-fourth percent more in mortgage interest rates depending on their score and other factors.

Lowest mortgage rates and your credit score

The good news is that, while you cannot erase your financial history, you can improve your creditworthiness and make yourself more appealing to lenders. You can find a variety of tips for boosting your credit score and qualifying for better mortgage rates.

Before you apply for a mortgage, you should take these six steps:

  1. Check your credit report. You may find errors that need correcting and you will find out if you have negative information that lowers your score.

  2. Pay past-due bills. Bringing your accounts up-to-date can improve your score.

  3. Limit your use of credit. Try to lower the balance on each credit card you have to less than 50 percent, or ideally, 30 percent, of the credit limit.

  4. Pay your bills on time. Sign up for email alerts when your bills are due.

  5. Pay more than the minimum due on your bills. One of the fastest ways to reduce your debt, if you don't have a lump sum available to pay your debt in full, is to pay more than the minimum due each month. Paying only the minimum could add years to your debt payments.

  6. Rebuild your credit. If you have had past credit problems, you may need to apply for a prepaid credit card to repair your credit score. It will take time, but you will see an improvement once you begin charging and repaying debt in a responsible manner.

Today's mortgage rates

If you would like to find out about today's mortgage rates or refinance your home, you are not alone. While you may not want to wait to buy a home, taking the time to check your credit and talking with a lender about your qualifications will prepare you for the mortgage process and help you buy a home you can afford.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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