Mortgage Loan

When you're finally ready and able to buy a home, don't forget to check your mortgage credit score. If it isn't high enough, you could end up paying a higher interest rate or even be denied entirely. To make it worse, a denial will knock our credit score even lower.

Most lenders expect you to have a minimum mortgage credit rating of 720 before they'll allow you the best loan rate available. In the current economy, lenders are more wary of potential foreclosure risks, so it's unlikely you'll have much room to negotiate if your score is lower.

What is Your Mortgage Credit Score?

Is your mortgage credit score different from your regular credit rating? Slightly. When applying for regular credit, your lender may only check your score from one of the three credit bureaus. When applying for a home loan , you lender will average your three scores together. There won't be a huge discrepancy between them; one score may be 20 points lower, for example, but you're likely to remain in the same credit category (excellent, good, fair, poor). If there is a big difference, check your credit report for errors or reports of negative history.

How to Build Your Mortgage Credit Score

You can build your mortgage credit rating in the same manner you build your regular credit score. Pay your bills, and pay them on time. You want to maintain a positive history, and the longer that history is, the better your score will be. Don't maintain high balances, either. You want to use no more than 30% of your available limit, but less is always better.

Be sure to check your credit score at least 3-6 months before your begin applying for a home loan. This way, if your score is not where you want it to be, you've given yourself time to start turning it around before the lender sees. If your score is too low to save in just a few months, you can consider other options such as leasing with an option to buy or using a private mortgage lender. However, if you want affordable payments and a low interest rate, your best bet may be to hold off, establish good credit, and start building a positive history.

Instantly see how your mortgage credit score compares to the average.