Credit Scores Affect Mortgage Rates
Credit scores affect mortgage rates due to the various rules changes for mortgage lending. Credit scores now play an even bigger role than ever in determining the interest rate charged for a mortgage.
According to CanadianMortgageTrends “Never before has your credit score had such an impact on your mortgage rate.” They go on to say, lenders have:
- Set different rates for different credit score ranges; and/or
- Raised their minimum credit scores for given mortgage products.
The FICO Score?
A FICO score is a commonly used method employed by reporting agencies to arrive at your credit score based on five categories. The percentages below reflect the importance of these categories for the general population and how they impact your score:
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- 35% of the score is based on payment history,
- 30% on amounts owed,
- 15% on length of credit history,
- 10% on credit mix,
- 10% on new credit.
Improving Your Score to Receive the Best Rate
To insure you receive the best mortgage rate possible, improve your score by following these four minimum guidelines set out by Canada Mortgage and Housing:
- Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the required minimum shown on your monthly statement.
- Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible.
- Never go over the limit on your credit cards, and try to keep your balances well below the limits.
- Reduce the number of credit card or loan applications you make.
Get a Good Mortgage Agent to Help
A good mortgage agent can be a big help in this regard, which you need since credit scores affect mortgage rates . He/she can also help consolidate debts if needed, shop a variety of lenders for best rate and the least restrictions on your mortgage contract, create a timeline to get your credit score to a lender-approval level.
If you are wondering what you can do, pick up and call Joe @ 289-969-1935