 Lower your monthly mortgage through higher credit scores - Let me start by stating something that may be very obvious simply by the title – if you have a high credit score you will pay less each month for your home.
That’s the truth and many have taken advantage of a high credit score to assist in managing their long-term mortgage payments. In order to understand why this may be true I’d like to provide the anatomy of your credit score.
Your credit will range from a low of 300 to a high of 850. The average has been around 720. Anything above 720 is very good. Below 720 might indicate a problem to creditors.
Three Benchmarks of Past Performance
The three credit reporting agencies (Experian, TransUnion and Equifax) all cull data from three common wealth management techniques in order to come up with your score although Experian no longer allows the consumer to actually see what they are reporting to creditors.
Bill payment history. If you have been late in payment or have defaulted on one or more loans this can negatively impact your credit rating. On the other hand constant ‘on time’ payments can make up ground if other issues are not as strong. Extremely negative bill paying practices can plague your score for up to seven years.
Available credit. These reporting agencies will look at all the credit cards you have available along with other lines of credit to determine how much credit you have access to. The less you owe the better your risk is viewed.
Historical overview. Have you applied for multiple lines of credit? Have multiple companies accessed your credit report because you keep applying for new loans? How long have your credit accounts been open? How many accounts do you have open? Credit reporting companies take all of these issues and more into consideration when assigning a score.
The How-To of Lower Mortgage Payments
Pay off debt. Decrease your overall debt load. Sacrifice things you would like to have now in favor of lower interest rates.
Don’t open new accounts. Every credit account you have contributes to your credit history. If you’ve had a credit card for five years and you just added a second one then the median age for your credit account is now 2.5 years.
Pay every bill on time – every time. Give your credit report a positive historical record. Allow creditors to see your responsible side. They like that.
Monitor your score. You have access to one free credit report each year through www.annualcreditreport.com check it out so you can see what creditors are seeing.
What a Credit Score Will Do For Your Mortgage Payment
A credit score below 580 will see credit terms that may cost as much as 25% more in monthly mortgage payments than a score in excess of 760. As an example a score of 760 might find a monthly mortgage payment of $2,000. If the score were below 580 the payment would escalate to $2,500. That means you would be paying $6,000 in additional mortgage payment each year or $180,000 over the life of a 30-year note.
Maybe that’s enough motivation to evaluate your credit report and make a few changes that can raise your score and potentially lower your mortgage payment.
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