Ouch, Low Credit Scores Can Drive You Into The Poorhouse
February 3rd, 2008
Many people don’t know their credit score. When buying a home, this can translate into costing you a lot of money. The interest rates that mortgage companies can offer you are mostly dependant upon this 3 digit number.
I will spell out the top reasons why you should care about your score, as well as how to get started!
To illustrate, a credit score in the low 700 range could qualify for a rate of 6.6% requiring a monthly payment of $1916. While this same scenario, but with a credit score of mid 600 would get a 7.7% interest rate, translating into a $2138 monthly payment.
That is $2664 more per year because of this credit score number. Over 30 years this would be almost $80000, ouch!
You can receive your credit score for a minimal cost ($10-$15) A recent study found that fewer than 6 out of 10 Americans have obtained their credit scores.
You can’t fix what you don’t realize is broken!
Your credit report can be obtained for free once per year. Since there are 3 reporting bureaus, request a report every 4 months from a different bureau. Links to the 3 major firms can be found on this site:
Consumers can take certain steps that will improve the scores. The two greatest factors that go into the scoring system is payment history and how much of the available credit that is being utilized. So pay at least the minimum each and every month and open up that gap between the outstanding credit line and the available credit line.
Other steps to improve the score would include keeping the number of applications for new credit products to a minimum and keeping open the credit line that has your longest history.
So don’t go applying for a few department store credit cards when planning to buy a home in the next few months. Also, don’t necessarily close that Visa card that is 15 years old but that you don’t use anymore.
The moral of the story, get your credit history in order when getting ready to buy a home, and your mortgage broker will also appreciate seeing that 800+ credit score when reviewing your file.
Categories: Mortgage Updates, Real Estate
This entry was posted on Sunday, February 3rd, 2008 at 3:09 pm and is filed under Mortgage Updates, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
[...] Also review my past blog post on credit reports and your score. MetrowestHome.com Blog Post on Credit Scoring [...]