How Credit Score Affects Mortgage Rate

Credit Report

Boost Your Credit Score for a better mortgage rate

Improving your credit score is one of the most effective ways to secure a lower mortgage rate. Your first step is to obtain a copy of your credit report.

You can request a free copy of your report from each of the three bureaus Equifax, Experian, and TransUnion once a year.

Carefully review your reports to identify any errors, such as incorrect personal information, accounts that are not yours, or incorrect account information.

Gather any documentation that you may need to dispute any errors found.

Any documents that will support your claim, such as credit card statements, receipts, proof of address or court documents.

You can dispute errors online, by phone, or by mail and the credit bureau will investigate your dispute and respond within 30 days.

If the bureau finds that the information on your credit report is incorrect, they will correct it and send you an updated credit report.

Updating your credit report can take time but a clean credit report can help you qualify for lower interest rates and better loan terms.

Opening A New Card

On the one hand, opening a new account can increase your available credit, which can help reduce your utilization ratio if you maintain low balances.

This can have a positive impact on your overall score.

On the other hand, opening a new account can result in a hard inquiry on your report, which can temporarily lower your score by a few points.

Additionally, if you have a short credit history or a lot of recent inquiries, opening a new account can further lower your score.

Opening too many new accounts in a short period can also negatively impact your score.

It can suggest to lenders that you are relying too heavily on your credit and can make you seem like a higher risk borrower.

In general, opening a new account can help or hurt your score, depending on your individual credit situation so you need to know which variables to concentrate on and consider.

This is where having an experienced mortgage broker comes into play. 

They will consider your overall goals, your utilization ratio, and your credit history to best guide you towards the correct parameters.

Most mortgage brokers will advise against opening up any new lines of credit or making any large purchases until after your mortgage has closed but every client is different, and this guidance will ultimately be based on your individual needs.

Other Factors To Consider

Your payment history is one of the most significant factors impacting your credit score.

Equally important are your utilization ratios.

Try to keep your card balance below 30% of your credit limit.

High credit utilization can negatively impact your score almost as much as a late payment.

 Lastly, the length of your history is also an important factor so try to avoid closing old accounts, even if you no longer use them.

Getting Help With Your Credit From Your Mortgage Broker

Your mortgage broker can be a valuable resource for improving your credit score and getting a better rate on your mortgage.

They can provide expert advice and personalized guidance to help you achieve your homeownership goals.

They can not only help you identify any errors or inaccuracies that may be negatively impacting your score, but they can also advise you on how to reduce your utilization ratio and improve your payment history.

In addition, a mortgage broker can suggest other strategies to improve your score, such as paying down debt or adding positive information to your credit report.

They can pull an updated credit report once their recommended changes are fulfilled by you so that your new stronger score can be submitted to the lender.

A mortgage broker also has access to a wide range of lenders and mortgage products, and they can help you find a lender that is willing to work with you, even if you have a lower-than-average score.

 They can also help you compare mortgage rates and terms from different lenders, so you can choose the best option that fits your financial goals and budget.

By following their tips, you can boost your score and secure a lower mortgage rate, which can save you thousands of dollars over the life of your mortgage or at the very least, help you find a lender that best matches your situation.

Either way, a mortgage broker is a wonderful resource to have in your corner when navigating a tough home buying market.

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