If I Have a Increased Credit score Rating, Will I Get a Decrease Mortgage Charge?
Published onAugust 16, 2021from North forest
A mortgage is a big money loan that is usually given to buy real estate, but also to those doing renovations or looking to get extra cash out of the value of their existing property.
When looking for a mortgage, lenders want to know they can trust you with that amount of money. Therefore, they do a thorough background check during the qualification process. One of the things they want to see is whether you have a high or low credit score. The answer to this question will have an impact on whether your mortgage application will be approved and what interest rates you will be offered.
What is a good credit score?
In Canada, every time you borrow money (credit) it is added to your credit report. How you deal with repaying that money will affect your credit score. If you’ve been reliable in paying off your debt, your score will be higher. However, missed payments, high credit card balances, and credit defaults will lower your rating.
Credit scores range from 300 to 900, with anything over 700 considered excellent. However, if you are between 650 and 700 years old, you likely still qualify for the lowest mortgage rate. While it’s good to keep your credit score as high as possible, once you hit 700 there is little difference with lenders. In other words, if you get 900 points, you won’t qualify for better prizes than someone who only gets 700 points.
It’s important to note that if you’re paying less than five percent for a down payment, you must get mortgage default insurance. To qualify for this insurance, you must have a credit rating of 680 or higher.
What if i have a low credit score?
If your credit score falls below 680, you can still qualify for a mortgage, but you won’t get the best interest rate available. You need to look for B lenders rather than A lenders. B lenders allow you to get loans if you have a score below 600, but they often have additional fees and higher interest rates.
If you have a low credit score, there are two options:
- Wait to buy a home and work on improving your credit score.
- Apply to a B lender and consider paying a larger down payment or using a co-signer on the mortgage.
How to Increase Your Credit Score
There are many things that you can do to improve your credit score. It may take some time, but it pays to have lower monthly payments for the life of your mortgage.
- Pay your bills on time – late payments will lower your creditworthiness.
- Monitor Your Plan – Keep an eye on your plan by reviewing it every six months.
- Keep debt low – don’t hit your credit limit. Instead, try to keep your credit card balance low. This will make you appear more responsible to lenders.
- Avoid defaults – if a debt collection agency takes over your debt, your creditworthiness will be hurt.
To learn more about how your credit score is affecting your mortgage and what mortgage solutions are available to you in Ontario, call Northwood Mortgage at 888-492-3690 or contact us here.