Improve Credit Scores to Improve
Your Interest Rates
Did you know that if you improve credit scores you will save money? How? Good credit scores equal lower interest rates which saves you money!
Do you know your credit scores? These important numbers will determine your interest rates. Your interest rate determines your monthly mortgage payment.
When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’re taking by loaning money to you. FICO scores are the scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus –
Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well.
Your 3 FICO scores affect both how much and what loan terms (interest rate, etc) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.
LOOK AT THESE INTEREST RATE EXAMPLES:
For example, on a $216,000 30-year, fixed-rate mortgage (principal and interest only):
If your scores are between 760-850 your interest rate is 6.01%. Your monthly mortgage payment is $1,296.
If your scores are between 660-679 your interest rate is 6.62%. Your monthly mortgage payment is $1,382.
EXAMPLE THREE: If your scores are 620-639 your interest rate is 7.6%. Your monthly mortgage payment is $1,524.
A person with FICO scores of 760 or better will pay $228 less per month for a $216,000 30-year, fixed-rate mortgage than a person with FICO scores between 620-639.
THAT'S A SAVINGS OF $2,736 A YEAR! You can see that it pays - literally, to improve credit scores.
Your Score Affects...
Your credit scores not only affects whether or not you get a loan; it also affects how much that loan is going to cost you. As your score increases, your credit risk decreases. This means your interest rate decreases (which ultimately means cheaper monthly payments).
SIDEBAR: Your interest rate affects the amount of home you "can afford." Suppose you could only afford to pay $1,296 and not $1,524. This would take you out of the $216,000 price range down to the $190k's to the very low $200k's.
Try your best to maintain and keep your credit in good standing...this will save you thousands each year!
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