Your credit score can have a big impact on your homebuying plans. Mortgage rates are a key factor in affordability, especially today, so it’s important to understand how your credit score can affect your options. Here’s what you need to know:

The Federal Reserve Bank of New York reports that the median credit score for those taking out a mortgage is 770. But that doesn’t mean you have to have a perfect score to qualify. An article from Business Insider explains how different FICO score ranges can impact your mortgage options:

“. . . you don’t need a perfect credit score to buy a house. . . . Aiming to get your credit score in the ‘Good’ range (670 to 739) would be a great start towards qualifying for a mortgage. But if you’re wanting to qualify for the lowest rates, try to get your score within the ‘Very Good’ range (740 to 799).”

Your credit score can play a role in the mortgage rates you qualify for, but it’s just one factor in the lending decision. To get the most accurate picture of your options, it’s best to work with a trusted lender who can help you understand how your credit score fits into the equation. FICO explains:

“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single ‘cutoff score’ used by all lenders and there are many additional factors that lenders may use to determine your actual interest rates.”

If you’re looking to improve your credit score before applying for a mortgage, there are a few simple steps you can take, according to Experian:

• Pay your bills on time: Late payments can negatively impact your score, so be sure to pay all bills on time and pay any late fees immediately.
• Keep your credit utilization low: The less of your available credit you use, the better. Aim to keep your utilization rate below 30%.
• Avoid applying for new credit: Applying for new credit can lead to hard inquiries on your credit report, which can temporarily lower your score.

A trusted lender can help you understand the impact your credit score has on your mortgage options and guide you through the application process.

Bottom Line

To sum up, if you’re planning to buy a home in the near future, improving your credit score could pay off in the form of a lower mortgage rate. To learn more, get in touch with me today.