Credit Scoring and Your Home Mortgage

By Sheryl Landrum
LoanPage.com Columnist

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The biggest factor in getting a good interest rate for a new home loan or refinance, is your credit score. Here are some simple ways to improve your credit and qualify for the best mortgage available.

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Mortgage Credit Scoring Fundamentals

  • » Paying your bills on time counts for 35% of your credit score. Late payments, especially on mortgage loans, can ruin your credit scores. A 30 day late payment is not the same as a delinquent payment. In order to get a 30 day late you must pay over 30 days past the due date.
  • » Debt owed to credit limit equals 30% of your credit score. For best results, no more than 25% of your available credit should be used; however, less than 50% is also a good benchmark.
  • » Length and breath with your creditor counts for 15% of your scores. Do not cancel all of your credit cards when you pay them off.
  • » The types of credit you owe equates to 10% of your credit score. Applying for "no payments for a year" will lower your credit score as the risk of not repaying a debt gets higher the longer the due date.
  • » 10% is weighed on new credit opened. Try not to open too much credit at once and do not let too many people run your credit report!
Taking care of your credit can make a huge difference in your ability to qualify for a new home loan or mortgage refinance. Not only is your ability to qualify for a home mortgage affected, but the interest rate and the new home loan terms you are offered are dependent on your credit. By following a few basic steps as outlined above, you can be on your way to qualifying for the best loan possible.

About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer on mortgage issues.

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