Credit Reports

Credit Reports

Why Do You Want to Keep Good Credit History?

Your credit record has a significant impact on your ability to get a mortgage. It also influences the interest rate that you are offered. It’s important to improve your credit score as much as possible in order to get the best mortgage possible.

Your Credit Record

If you plan to buy a home or refinance your mortgage, a mortgage lender will look carefully at your credit record at the time you apply for a mortgage.

Your credit report shows how well you have handled credit in your past and how you use it currently. Your credit record is kept electronically by both Equifax and Trans Union.

A credit report lists the information in your credit record: good and not so good. It lists your debts and payment history with companies which have loaned you money, such as banks, credit card companies and retail stores. It indicates whether you pay bills on time and for the amounts due. Your credit report also identify any bankruptcies, collection items, even if they happened a few years ago.

How Your Credit Report/Credit Scores Impacts Your Mortgage Application

Before you even meet with a mortgage lender, you should get copies of your credit reports and review them. One of the first things a mortgage lender will do when you ask for a mortgage loan is to order a copy of your credit report. As part of the credit report, lenders often get a credit score.

A credit score is a computer-generated number that tells them how likely you are to repay your debts. It is a statistical way of predicting how likely it is that you will pay back a loan, such as a mortgage, that may be made to you. See the range of “good“ credit scores:

60% of the population are in the range of 681 to 816, who are considered to be in good standing in credit worthiness.

Credit Scores, Mortgages and Its Interest Rates

Credit scores determines whether you get a mortgage or not, and the interest rates banks offer. If your score is above 680, most banks would want to have you as customers. If your score is below 630, banks may not consider you for a loan application (you may want to deal with trust companies and your interest rate would be higher than banks). If your score is below 600, you would have difficulty finding a lender who is willing to grant you a loan. Even if you are granted with a loan, the interest rate would be much higher than bank mortgages (those mortgages are sometimes called “Sub-prime Mortgages“).