If you are interested in purchasing a new home, you will need to figure out a few things before you move forward. It’s important to save up enough money to comfortably put a down payment on your home. You also need to find a great loan provider like All American Financial Services to help you get the financing you need. Equally important is understanding that your credit score will directly impact the mortgage loan you receive. Your credit score is essentially what tells loan providers your worthiness as a borrower. If you aren’t too familiar with credit scores or would like to learn some of the essential bits of information on them, keep reading on below.
1. Check Your Credit Score for Free
You might be wondering what the best way to find out your credit score is and how much it’s going to cost you. The good news is that you can actually check your credit score for free. Just head over to the three major credit reporting bureaus and you can get one annual credit report for free. This is actually required by law. Checking your credit score also won’t have an impact on your score, so you don’t have to worry about negatively impacting your score just from taking a look. After you know your credit score, you will have a better idea about what kind of mortgage rates you are in the market for.
2. Your Credit Score is Calculated Using Formulas
Another important concept related to credit scores is understanding how they are calculated. Your credit score is actually calculated using a formula that involves your payment history, how much credit you are currently using, the length of your credit history, and the number of inquiries you have on your credit report. All of these things are assigned certain scores and then combined to determine your total credit score.
3. Your Credit Score Affects Your Mortgage
If you’ve been saving up and are looking to purchase a home soon, you should definitely understand how your credit score will affect your mortgage. It will directly impact your mortgage interest rates and loan amounts. If your credit score is over 720, you will be able to qualify for the best mortgage rates. The lower that your credit score is, the higher your interest rate on your mortgage will be. You also might not be able to qualify for certain lenders if your credit score is very low.
4. Improving Your Score Isn’t Too Difficult
If you are trying to get the best possible interest rates for your loan, you want the highest credit score possible. The good news is that you can actually improve your credit score fairly easily. The easiest way to make improvements is to start making all of your payments on time. Paying down your credit accounts can also improve your score. Try to avoid applying for a bunch of new accounts too if you plan on getting a mortgage anytime soon.