When you apply for a home mortgage, your credit scores will be one of the most significant factors that will influence the interest rate and loan terms that you receive. Your scores can also have a direct impact on whether you are approved for your mortgage or if your request is denied. Some people believe that only those with very serious credit issues will have lower scores, but there are actually a number of factors that can influence your scores.
A Single Late Payment Can Have a Dramatic Impact on Your Score
Your credit scores are often more significantly impacted by a recent late payment rather than by multiple late payments that are several years old. More than that, if you had a higher credit rating before the recent late payment, your score may decrease more dramatically than those who had a lower rating to start with. For example, if you had a 780 FICO score and you just had a 30-day late payment on a mortgage reported, your score may decrease by approximately 100 points. On the other hand, if you had 680 FICO score, that same 30-day late payment would only drop your score by 60 to 80 points.
Before You Apply for a Mortgage
Your credit rating is integral to your qualification of a mortgage as well as the terms that you will receive. With this in mind, before you apply for a mortgage, you should consider pulling a copy of your credit report and reviewing the information being reported. If any information is not accurate, you can contact the bureaus to correct the information. If you have a recent late payment, it may be worthwhile in some cases to delay applying for a mortgage for several months so that can improve your scores. In addition, during the loan process, take every step possible to pay your bills on time during the loan process. Many lenders will pull a final credit report a few days before closing to ensure that your rating has not changed.
Credit ratings can be confusing to understand because so many factors are reviewed and analyzed. Keeping your rating in good standing is ideal, but if you do have delinquencies or other types of derogatory credit information, taking time to re-establish your credit rating can be beneficial for you. MortgageDepot can provide you with more insight about your current scores and steps you can take to improve your rating.