How A Credit Score Rating Impacts Your Mortgage

A credit score can severely impact the likelihood that you will get approved for a mortgage. Since it is the biggest factor in the mortgage decision process, learning about your credit score should be a top priority. It is possible to calculate your interest rate and monthly mortgage payment based on your credit score alone.

As a general guideline, aim for a credit score range between 760-850. Stay away from credit scores under 620, or else you risk falling into the subprime borrower category.

Tips to help you put your best credit score forward:

1. Stay informed. Check your credit score at least once a month. Many credit score agencies offer free credit score estimates. Also, order a credit report every year. A credit report is about $20. There are two reasons why this step is essential. First, this credit report will alert you to any issues or miscalculations. You can file a credit reporting complaint through the Consumer Financial Protection Bureau. Second, this credit report will help you develop a game plan for how to keep your score on track.


2. Use a mortgage calculator to see what rates you can afford with your current credit score.


3. The three main credit reporting agencies (Transunion, Experian, and Equifax) will provide you with three scores. Mortgage lenders look at the middle score. Therefore, do not be deceived if you receive one extreme score.


4. Make it a habit of paying all of your bills on time. Habits take about 30 days to form. Set reminders to pay your bills on your phone calendar and your computer calendar.


5. Do not apply for more credit than what you need. Having too many credit accounts will negatively impact your score.


6. Do not use all of the credit that is available to you. For example, if you are approved for a $1,000 credit line, keep your usage to $500 maximum. Another option is to tell the credit-issuing company to cap your account at half of the approved amount. Only go above this threshold for emergencies.

Be sure to research the credit score requirements for some of the most popular loan types including conventional loans, VA loans, and FHA loans. 

For your reference, the chart below lists credit reporting agencies, their contact information, and the credit score type they offer.

Carolina Palmer

Carolina Palmer is the Senior Editor at Lender411. She graduated from Concordia University Irvine with a Bachelor's Degree in Communication Studies and Marketing. She has multiple years of experience in marketing and writing, and has previously worked with 3D Systems and Microsoft.