Understanding Your Credit Score and How It Affects Your Interest Rate

Understanding your credit score and how it affects any loan you apply for is a challenge.

About 1/3 of your credit score is based on whether you pay your bills on time. Another 1/3 on how much of your credit you use (utilization).

Creditors and lenders are more cautious of whom they loan money to. Simply put, if you have a poor or bad credit score, you are bad credit risk; your access to money is limited, and open to fewer opportunities. This is sad, but definitely how it is! But most importantly, you can fix it! How? One way is to contact …….

Your Credit Score Determines Your Interest Rate Which Effects Your Monthly Payment
The higher your credit score the less you will have to pay in interest to borrow money.
You may get a car loan, but the interest rate you will pay will be higher than a person with good or excellent credit. You will be paying more, perhaps hundreds if not thousands more

Credit Scores:
• 500 – 579 – It is difficult to get a home loan with a score this low. If approved expect a loan 2% more than average rate. FHA loans might be available but more down payment is required.
• 580 – 619 – An improvement, but a 1% higher rate than the average.
• 620 – 679 – Typically there is only a 0.5%-1% interest rate higher.
• 680 – 720 – The average home buyer paying going rates.
• 720 – 770 – Gets you the best rates.

Tips for Lowering your Credit Score:

• Pay down your Credit Cards – Lower your credit Utilization. Credit cards don’t have to be paid off each month, just pay them down. Pay a bit more than the minimum. The higher the balances the more they hurt your credit score. You should get your balances as low as possible trying not to use more that 30-35% of your available credit on each card you have, before applying for a home loan.

• Pay On Time. Don’t make late payments.

Want to buy a home? Who doesn’t? Want to buy one and not pay tens of thousands of dollars more over the term of that loan because of higher interest rate lenders will charge you? Raise your credit score. Change your ways. Let us show you how!

The purchase of a home may just be the most significant purchase and investment in your life. Contact Pujol Law Group. They understand real estate, mortgages and all the facets of what goes into the purchase or sale of property. Get a team of seasoned individuals, with experience in over 8500 real estate transactions, on your side to help lessen the stress and protect your rights.

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