Your Credit Score and Your Mortgage: The Difference Between Bad Credit Loans and Good Credit Loans
In today’s lending environment, your credit score is more important than ever in helping determine your mortgage rate. Put simply, the higher your credit score is, the lower your mortgage rate will be.
Knowing your credit score at the beginning of the mortgage loan process is extremely important; some lenders have cut-off score levels below which they won’t even approve a loan.
To help with this process, DNJ Gateway Mortgage offers a free, no obligation mortgage pre-qualification that includes a one-on-one credit review. It also includes a copy of your credit report and your scores.
These days, a score of 740 or greater is considered excellent and will earn you the lowest rates. In general, for every 20 points you score below 740, your rate quote will be impacted.
Your Credits Score Can Vary From Lender to Lender
When you request a credit score online, it may look different than what we’re able to pull as a mortgage lender. Auto dealers and credit card companies will score you differently as well, using their own respective scoring criteria.
In addition, your credit score can also fluctuate based on your real-time payment history, current balances, new lines of credit and other factors. Because of this, your credit report is generally only valid for 90 days.
Will Requesting a Credit Score Report Lower My Score?
Yes and no. Credit score reports pulled via one of the three major credit reporting agencies have no effect on your overall credit score. However, that type of report isn’t valid as a means for us to approve a mortgage, but only to give you an idea of your current score.
Your credit score is affected negatively when your credit report is pulled by a credit card company, a mortgage lender such as DNJ Gateway Mortgage, or when you apply for financing, housing, insurance and so on. Each credit inquiry can lower your score as much as five points.
The scoring system counts multiple inquiries made in a 14 day period as just one inquiry, and all inquiries made within 30 days of the credit score being calculated are ignored.
What is a Bureau-Issued Credit Score, and How is it Calculated?
Credit scoring is a way to tell how likely a borrower is to pay back their loan—or potentially default. Scores range from around 300 to 850 points and are available from three national credit bureaus: Equifax, Trans Union and Experian. The scores are often referred to as FICO scores.
The credit score is based on the information available in the loan applicant’s credit report to generate a statistical analysis. It measures the borrowers risk profile to the lender, but it doesn’t account for income, assets or bank account (though these may still be taken into account independent of the score).
Credit data on millions of consumers helps calculate your overall credit score. The bureaus take this data and analyze credit patterns to predict risk and forecast credit performance to determine those who will receive bad credit loans or who will receive good credit loans.
The types of information used include:
- Payment history
- Outstanding debt
- Credit history
- Number of credit inquiries and new account openings in the last year
- Types of credit in use – bankcards, installment loans, department store cards, etc.
The Middle Credit Score
The score used when determining your mortgage rate is the middle score of three. For each borrower the high score and low score are discarded and the score in the middle is the one considered. In the case of co-borrowers, the lower of the two middle scores is used.
Example scores: 725, 733, 710
The middle score, 725, would be used when considering whether you’ll qualify for bad credit loans or a good credit loans.
Call Us Today for More Information on Good Credit Loans, Bad Credit Loans and More!
Our loan officers are standing by to help you get the home of your dreams. We’ll answer any questions you have about your credit score and give you more details about bad credit loans and good credit loans.
If you live in Maryland, Virginia, North Carolina, South Carolina, Georgia and Florida, call us toll free at 877-9-NO-COST (877-966-2678)!
DNJ Gateway Mortgage proudly serves clients in Raleigh, Durham, Chapel Hill, Cary, Apex, Greenville, Fayetteville, Fort Bragg, Greensboro, Winston Salem, High Point, Wilmington, and Charlotte, NC, and surrounding areas. We also offer mortgages in South Carolina, Virginia, Maryland, Georgia and Florida.
