Archive for September, 2009

Credit Scores and Your Mortgage Interest Rate

Sunday, September 27th, 2009

Are you looking for a hard and fast rule to tell you when you’ve raised your credit scores “far enough?”

You may not find one. A search of dozens of internet sites yielded results that ranged from 720 to 770 as the top score – the one commanding the very best rates in the mortgage industry. The most commonly mentioned score was 720, with 740 a close second. But Fair Isaac – the company that created the FICO scoring model – said 760 to 850 was considered the top score.

All agreed that once past the magic 720 (or 760) figure any increase in scores only makes you feel proud of yourself – it does nothing further to lower the interest rates offered to you.

A score of 620 seems to be the recognized dividing line between acceptable credit and “poor” credit, and in most cases you will not qualify for a mortgage with a credit score under 620.

Consumers should also be aware that the credit scores obtained on line are not the exact scores used by mortgage lenders. Even those purchased directly from myFICO are slightly different. Since the difference can be as much as 10-20 points, it’s a good idea when working to improve scores to shoot a bit higher than you think is necessary.

Thus, a consumer who sees an on-line score of 620 should continue taking steps to raise that score to at least 630 or 640 before making a loan application. To be assured of the lowest interest rate possible, shoot for an on-line score of 780.

Right now, the difference between high and low interest rates is around 1 ½%. The improvement you make in your credit score (or the damage you do by making an application for a car or a new credit card) may only alter your interest rate by ½% – but that has a big impact over 30 years. For every $100,000 of your loan amount, the monthly payment would go up by about $30. That equates to $10,800.

The importance of raising their credit scores is one reason why smart consumers are turning to’s new credit report offering with its SMART actions button. The new system not only helps consumers correct errors that hurt their scores; it shows them how their actions will help or hurt their scores. This revolutionary new offering gives consumers a new level of control over their own financial futures.

Of course, your credit score is just one of the variables that determines your mortgage interest rate. The loan program itself plays a part, as does the amount of your down payment, your income, your work history, and your other debt. your resource for free credit report offers and the most current information regarding credit news. We also provide free tips and techniques to repair your credit for free. “Remember your credit report and credit score is more important than ever now.”