Credit Scores Play a Big Part in Getting the Best Rates

Posted by on Friday, October 1st, 2010 at 6:47pm.

In today's market nearly every lender in the country is requiring a minimum credit score of 620 or higher. Unfortunately this eliminates nearly one-third of potential homebuyers according to Zillow. The other two-thirds of buyers may qualify for a loan, but will need a score above 740 to get the best rates. If your score falls between 620 and 740, there will most likely be an adjustment to your rate, or you could possibly miss out on credit that you would have otherwise received.

If you are below 620 or just below 740, here are a few things you can do to raise your score while looking for a home:

Pay your bills on time- Sounds simple, but one recent late payment can drop your score significantly.

Keep your debt ratios low- If your credit limit on your credit card vs. your balance is too high, you can lose significant points. I have seen 30 points or more for a single credit card. Never have your credit cards maxed out when trying to buy a home.

Opening up new credit- If you open up a new credit card or buy a car, this can negatively impact your score as well. Generally speaking it is not a good idea to open anything when getting ready to buy a home or during the process. There are some circumstances where one may have little to no credit where opening up a new credit card can be positive for your score. You would want to consult an expert in this case.

Don't close your credit card accounts- Generally speaking it is not a good idea to close a credit card that you are no longer using. If you do so, you could potentially eliminate a positive piece of credit from your score which can significantly drop your score. Every credit report and situation is different, so make sure that you get professional help before making changes to your credit profile.

Toby Lane is a loan consultant with Academy Mortgage in Atlanta. You can visit him on the web @ www.atlantagamortgages.com and search Atlanta Mortgage for topics such as Atlanta Credit Repair or GA first time homebuyer.

8 Responses to "Credit Scores Play a Big Part in Getting the Best Rates"

Mesa Foreclosure wrote: This is great advice. We get asked these questions all the time. These tips are simple and easy and there is no reason to procrastinate taking action.

Posted on Monday, October 4th, 2010 at 1:26pm.

Alex Cortez wrote: Good points, Toby. The importance of good credit is paramount, with credit-worthy buyers enjoying phenomenal interest rates.

Posted on Wednesday, October 6th, 2010 at 10:27am.

Ann Yu wrote: indeed! I keep thinking if I would close my account and you just said it, (not advisable to) so I guess I won't be closing it, you've made a reliable list for me, thanks

Posted on Monday, October 11th, 2010 at 9:53am.

Brenda Starr wrote: I agree with you...inform the potential buyers about their credit scoring criteria. It's still amazing to me that most of them don't know the simple steps you pointed out. Good job.

Posted on Thursday, October 14th, 2010 at 12:31pm.

Jason Gilbert wrote: Very good information. The more I learn about the short sale process, the more I realize how important a consumer's credit score is. This is vital information and getting the truth out there about this stuff is helpful. Thanks.

Posted on Wednesday, October 20th, 2010 at 8:37am.

Brian E. Reynolds wrote: These are great tips on improving credit scores. It's also important for prospective buyers to talk with a mortgage lending professional to see how they can improve their scores. This person can also help them understand what not to do that may affect their score in a bad way.

Posted on Thursday, October 21st, 2010 at 12:16pm.

Steve Redman wrote: I have been told that keeping just 1 credit card can be bad. My mortgage expert told me to keep 2 revolving credit cards - I use one just to pay for gas and make sure it's paid on time.

Posted on Thursday, December 9th, 2010 at 9:19am.

Dream Rentals Vancouver wrote: These tips can be very helpful. "Keep debt ratios low" is very important point.

Posted on Wednesday, December 29th, 2010 at 8:35am.

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