A late or missed mortgage payment can affect your credit score. But you can get ahead of the problem by being proactive, utilizing payment reminder tools, and speaking with your lender.
If you’re beginning to think about purchasing a home there are a few steps you should take in preparation for applying for home financing. A significant part of applying for a home loan is your credit score.
A credit score is a number given to you based on an analysis of your financial responsibility and represents the risk a lender is willing to take on you when you borrow money. Therefore, the higher your credit score, the more willing a lender is going to be in lending you money.
There are seven factors that play into your credit score. Your credit score plays a role in determining whether you are going to be approved for home financing and it defines what interest rate you will be receiving. The higher your credit score the most likely you will be approved for a lower interest rate so it pays off to boost your score.
Breakdown of Credit Scores
The maximum credit score is 850, and the lowest is 300. Here is a breakdown of credit score levels:
- Excellent credit – above 750
- Good credit – 700-749
- Okay credit – 650-699
- Poor credit – 600-649
- Bad credit – below 600
When it comes to home financing you can expect the minimum credit score requirement to be 620 for most loan programs.
If you’re working on boosting your credit score, there are a few ways to improve it. The best ways are to pay down your current credit card balances and make your payments on time. We also suggest that you check your credit score frequently to stay in the know and make any corrections if need be.
There are three credit bureaus that you can use to find your FICO credit score; those are Experian, TransUnion, and Equifax. Below are four websites that partner with Experian, TransUnion, or Equifax that you can use to check your credit score for free online.
Credit Karma is an excellent website to check your credit score. Credit Karma partners with TransUnion to provide you with weekly updates of your credit score. If you see any mistakes in the update you are able to dispute them directly with TransUnion.
A Credit Karma membership is free and is able to stay free because they make a profit from the sales of bank or lender’s products that are recommended on the site. Credit Karma will offer you banking products that best suit your financial needs such as credit cards or insurance.
A Credit Karma membership also offers alerts if there are changes to your credit score and potential identity theft, and tools and education on what a credit score is and how to raise the number. Credit Karma also offers an Android and iPhone app so you can check in on your credit on the go.
Credit Sesame is also a reliable source to stay up to date on your credit score. Credit Sesame works with Equifax to provide you with your credit report. With a Credit Sesame membership, you will be provided with your weekly credit updates along with educational resources and tips on how to boost your credit.
Credit Sesame also offers personalized tips on credit cards and loans based on your financial goals and profile, and offers products that are best for you. You can also access Credit Sesame through their mobile app on Android or iPhone.
Nerd Wallet is different from Credit Karma and Credit Sesame in that they don’t just offer information on credit scores and your weekly credit update, they also offer a full suite of financial information.
Nerd Wallet provides financial tools on IRAs to credit cards to insurance to make it easier for you to make sound financial decisions and manage your money. Nerd Wallet provides you with your Vantage Score 3.0 which is a combination of your credit score across all three credit bureaus.
You don’t need a credit card to sign up, and you will be provided with weekly credit updates and security alerts if there is any suspicious activity on your credit report. Nerd Wallet also has an Android and iPhone app so you can access your financial information from anywhere.
Set your budget and track your progress using Mint. Mint is a useful tool to show all of your finances in one place and track your progress. Mint partners with TransUnion to monitor your credit score.
With Mint you will also receive the tools you need to manage your finances, receive offers on banking products that are a good fit for you, and monitoring alerts for your credit report.
Checking your credit on these sites doesn’t lower your credit score, however hard inquiries do. Hard inquiries are applying for a home or auto loan, or new lines of credit.
Ready to Apply For a Mortgage?
If you’re ready to put your credit score to work and apply for home financing, Sammamish Mortgage is ready to help. We’ll help you choose from a variety of best mortgage programs to fit your situation. We’ve been in the mortgage business since 1992 and know the ins and outs of home financing. We currently lend in all of Washington, Oregon, Idaho, and Colorado. Get in touch with us to have all your mortgage questions answered!