When your Mogo credit score is above 700, you are in a good position to take on a mortgage. Anything in the 800 or above range is incredible, and very hard to achieve. Since the average credit score is between 600 and 750, there is a lot of wiggle room when deciding on how to improve that score. Read the information below and learn more here to see how credit affects your chance of securing a mortgage.
Your Credit Rating Vs Your Credit Score
Things get more complicated when you realize that the national credit score average contains a lot lower scores than high scores. That means there are more people with sub 600 scores than there are with a higher number. Your credit score helps lenders decide if you’re a low or high risk when signing a contract. Debt and other financial obligations summarize the smaller things, but a credit much, much more complex than that. The two things you will hear about the most are credit ratings and credit scores. Although both share similar characteristics, there is a slight difference when lenders check each.
A credit rating is for businesses or government and is defined as a letter grade. The grade tells you the credit worthiness of the entity. To further complicate things, sovereign and corporate credit ratings are in their own category.
With a credit score, individuals get a number that is created by the information in their credit history. The three credit bureaus that help determine this are TransUnion, Experian and Equifax. These credit reporting agencies provide paper and digital copies that detail important credit information. So how does a user’s credit score factor into getting a mortgage? Credit worthiness is a thing, so don’t ignore the impact it has when seeking financial help.
Credit Worthiness
Lenders want to lend money to consumers, that is their job. There’s no shortage of businesses in the lending industry. But it is a business, and the way they make money is with interest. Your credit worthiness is a measuring stick that a lender can use to determine if you will actually pay them back. Without interest and fees, lenders are just giving money away. The biggest part of the approval process for financing is the underwriting, which is nothing more than a prescreen qualification check. A lot of people fail the easiest part of the approval process. Bad credit is an automatic disqualifier for lending, and only in special circumstances is that credit worthiness ignored.
Your credit worthiness follows you everywhere, so there is no running away from it. You can’t hide bad credit, and ignoring it will only make things worse when a debt is passed on to a collection agency. Once you pass the initial hurdle by having good credit, institutions will check various sources to confirm the initial data. It is still possible to have good credit but low credit worthiness. Make sure that everything you put on the initial application for the lender is correct since bad information will disqualify you from a loan.
How It Helps When Getting A Mortgage
Home loans are tied to credit scores. By not having a high enough score, you are locked out from even applying for a loan. Lenders have this in place to lower the risk of getting applicants who won’t pay them back. Usually, FHA loans have the lowest requirement with a 580 credit score. VA loans offer similar packages for individuals with lower than average credit scores. But even with a low score, you are not out of luck. Some lenders have opened their doors to low scores and made financing available. By providing a larger down payment, consumers can sometimes get better rates than their counterparts with higher credit scores.
A lot of things still factor into the equation, and a no from one lender shouldn’t stop you from pursuing another. The idea is to not apply for a mortgage until you have the credit to back it up. The magic number that everyone wants with interest rate is possible by having a good credit history. When you fail the credit check portion, the only way to get a good interest rate is with a high down payment. Consumers that take good care of their credit get the best of both worlds with a low/no down payment and low interest rate.
Things That Help Your Credit
As a catch 22, having a mortgage helps improve your credit. Never let a bill go to collections by not paying it. Set up payment arrangements with the originator of the bill so that your credit report stays clean. Hospital bills have a low impact on credit but can still be damaging when left unpaid. If there is no debt on your credit, now is a good time to create a ‘map’ of how your money is spent. Get a single credit card and use it sparingly. The idea is to use it just enough to get by, and then pay it on time. After a few months your report will fill up with positive notes showing that you’re a responsible spender.
Paying off a debt on your credit report does not automatically remove it. To ensure that a paid off debt is taken off, contact the company on your report. Make sure to do this before paying the last of anything you owe on a credit report. You want a promise to remove on payment in a letter, or through email from the issuer of the debt. Credit reports are provided each year for free from the three credit bureaus, so always check for your latest score throughout the year.
Wrap Up
Pay close attention to your credit score if you’re an individual, and your crediting rating if you’re a business. Both are equally as important if you want to borrow money from lenders. A home mortgage is much easier to secure when you’ve shown responsible spending through a credit report. Let your credit history speak for itself by keeping it as balanced as possible.