But a higher score is better

When you apply for a home loan, your loan officer will ask permission to pull your credit. That's the process of contacting the three major credit reporting bureaus - Experian, Equifax, and TransUnion and getting your credit report. You may wonder why that's important, what information is on there, and how your score affects your mortgage. Let's explore those questions and what you can do to raise your score.

Why your score matters

Your lender needs to be confident you'll repay your home loan. We verify your income and assets, but we also need to know how you handle other credit, like car loans or credit cards. Credit reports give lenders a detailed view of your credit history. They also include a numerical score. Each agency scores differently so it's unlikely your scores will all be the same. A higher score increases your chance of a loan approval and improves the rate you'll pay. A small rate difference may not seem like it matters, but over the life of a 30-year loan, it can really add up.

What's in a number?

Different types of loans require different scores to qualify, and while scores range from 300 to 850, mortgage lenders generally don't consider scores below 580 (with some exceptions). There's generally a correlation between the amount of your down payment, your interest rate, and your credit score. Typical score ranges for home loans are:

• Minimum: 580
• Fair: 630-700
• Good: 700-739
• Excellent: 740-820
• Outstanding: 820+

Start now, benefit later

First, make sure your report is error-free. You can get a free copy (without scores) from each bureau at annualcreditreport.com.

Next, unless your scores are perfect (yes, they do exist!), you can raise and maintain your scores with these steps:

• Pay bills on time
  • Address delinquencies
  • Pay down balances
• Don't apply for or open new credit, take on debt, or co-sign loans
• Keep credit card balances below 30% of credit limits
• Don't close existing credit accounts

The last suggestion may seem wrong, but part of your score is based on how long you've had a credit account, whether you've paid on time, and the current balance compared to the credit available. If you close a long-standing account with a low or zero balance, you'll lose valuable credit history, have less credit, and could lower your score.

Get ready to buy

Your CCM loan officer can help you understand what loans are available to you, based not only on your credit score, but also on your entire financial picture and your goals. Learn more by contacting us today!

CrossCountry Mortgage is not a credit repair company, credit reporting agency, broker, oradvisor. We do not provide any services to repair or improve your credit profile or score, nordo we provide any representation that the information we provide will actually repair or improve your profile. Consult the services of a competent professional when you need any type of assistance.