The battle cry of the ill-prepared homebuyer is that as long as the lender approves the mortgage, then all is well. That is also the motto of someone who is about to throw a lot of money away. A good credit score can get you a lower interest rate and that can save you a lot of money. To get an understanding of how much it can save you, let’s take a look at how much difference just one percentage point can make on a 30-year, $100,000 mortgage.
$100,000/30-years @ 7 percent interest => Approximate total value of mortgage is $277,009
$100,000/30-years @ 6 percent interest => Approximate total value of mortgage is $253,339
One percentage point saved this buyer $23,670. That is a savings worth waiting for.
Your Credit Report Is Free
United States federal law states that every consumer is entitled to one complete credit report from Experian, Trans Union and Equifax every 12 months. This report will tell you your current credit score from each agency and it will also give you a report of all of the details that go into your reports.
The reason you want to get a report from each agency is because each agency handles their reporting differently. You may have a great score from Trans Union, but an error with Equifax may cause your score with that agency to plummet.
Each report will come with a process you can use to challenge information and get things corrected. Follow those procedures to get your credit reports cleaned up and accurate.
Things You Can Do To Improve Your Credit Score Now
There are things that you can do right now that will improve your credit score in anticipation of getting your mortgage. When you pay your bills on time, you avoid late fees and you instantly improve your credit score. Create a home budget and give yourself every chance to pay your bills on time to improve your credit score.
Each time your credit profile is accessed, it affects your credit score. To keep your credit score under control, you need to stop applying for credit accounts, bank accounts and anything else that will cause activity on your credit profile.
Once you start making improvements to your credit score, you need to wait at least 30 days for the changes to take effect. By waiting just a few weeks, you can save yourself money and improve your chances of getting the mortgage you want.