When you meet a mortgage officer to discuss taking out a loan, the most important decision that he`ll form is concerning your credit worthiness for the mortgage. To arrive at this decision, he will examine your credit history in addition to your credit rating. The three major credit bureaus particularly Equifax, Experian and TransUnion accumulate data from all your lenders regarding your credit history and your record of settlement. They put together this data into a credit report and anyone who`s considering a mortgage to you will be able to obtain access to this credit report.
Credit scores are generally made by a firm named The Fair Isaac Corp. and because of this they are also known as FICO scores. They are made by taking the credit history information coming from the 3 credit bureaus and implementing a secret proprietary formula to create a score that`s in the range of 300 to 850. If you have a high credit score within the range of 760 and 850, lenders will generally give you a a much lower interest rate as well as a wider choice of loans. Scores of 620 and lower are usually regarded as subprime and high risk and lenders may decline a loan or charge you a lot higher rates of interest. The difference in percentage could be as much as three percent between a credit rating of 760 to 850 and a credit rating of less than 620.
Evidently there are other components the mortgagor takes under consideration to offset a low credit score. These elements include making a large down payment and a low debt to revenue ratio. Because of this you shouldn`t assume that if you have a low credit rating, you won`t be able to get a loan. You should not likewise restrict your selection of lender to lenders who concentrate on lending to people with bad credit. Canvass around vigorously and try several lenders prior to making your choice.
Several ways in which you`ll be able to strengthen your credit score are:
- Examine your credit reports from all 3 credit bureaus and verify that the details are accurate. Occasionally a mistake in a credit report can result in a lesser credit score.
- Pay down the remaining balances in your credit card. Start with the credit cards when you`re close to your borrowing limit. Mortgagors like debtors to have a lot of credit available but to make use of it lightly.
- You should note that closing down one or more credit card accounts will do nothing to enhance your credit score.
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