Credit score is a very important factor in determining your interest rate, which loan you qualify for, and your interest rate.
Dealing with credit issues and understanding your score can be one of the more challenging parts of the mortgage process. As outlined below, it may be possible to rapidly improve your credit score. Providing documentation disproving a derogatory item and/or paying credit balances down are the primary avenues for raising your credit score quickly.
The mortgage world often seems like an Edvard Munch painting—many shades of grey, the occasional scream. A credit score that warrants a higher interest rate at one lender may be fine for another. Some lenders give a break for a score above 780; several give preferential pricing over 740; and even more consider 720 good enough for a small price break. Some will not allow a borrower with a score below 680 to qualify for premium programs; for others it is as low as 620 for a borrower who meets other qualifications. This is why it is important to know your credit score and to shop your mortgage to a wide range of lenders—something that can most effectively be done by a good mortgage broker.
An important caveat: often when you are straightening out a derogatory item or reducing a balance, you creditor will tell you that the updated information will be reported to the credit agencies. Sometimes the information is updated, sometimes it’s not, and it can take as long as three months for the updated information to be reflected on your credit report. If you feel it would help you to increase your credit score, it may be possible to do so in as little as five days by going through a mortgage broker or lender with direct access to the credit bureaus. Make sure when you contact a creditor about a derogatory item or about lowering your balance, you always receive the new status of your account in writing. With that in hand, your mortgage broker or lender should be able to get the item changed, and the credit score raised quickly.
