Your credit score is important. You have likely been told in the past that your credit can have an impact on a number of things, mostly obtaining financing. If you are interested in buying a new home, you will likely need to obtain a mortgage. Mortgages, like all other loans, require approval. Your credit will play a major role in whether or not you will be approved for a mortgage.
The most important impact your credit will have on obtaining a mortgage is your approval. When approving a mortgage, mortgage lenders will closely examine your past credit history. This history often details when you borrowed money, if that money was repaid, and how quickly it was repaid. You may not have thought about it at the time, but any late loan payments or credit card payments could have a negative impact on your loan approval.
All financial lenders, including mortgage lenders, are cautious when it comes to handing out loans to individuals with less than perfect credit. That is why many do not. If you are interested in applying for a mortgage, you are encouraged to request a copy of your credit report. Once you have a copy of your credit report, you can see for yourself what your mortgage lender will be looking at. If you have any outstanding debts, you are encouraged to take care of them before applying for a mortgage. After paying your debts, you will need to obtain the appropriate receipts or wait until the debt has cleared off of your report.
When it comes to credit and mortgages, there are many individuals who do not know that their credit actually has an effect on their interest rates and down payments. Many financial lenders require a down payment on a mortgage loan or home. This down payment will be set upfront and it will vary. Your credit score will have a large impact on what your down payment will be. In a way, mortgage lenders use a down payment to offer themselves security when it comes to dealing with an individual that has less than perfect credit.
Your credit may also have an impact on the interest that you are being offered. Mortgage lenders are allowed to charge just about any interest rate that they like. This rate is usually within a range of four to ten percent. As with a down payment, many mortgage lenders use an interest rate to offer themselves security. Many individuals, with a poor credit rating, find themselves being charged more interest than someone with a good credit rating.
As previously mentioned, your credit history is something that you can change. With a small amount of time and work, you do not have to let your past mistakes have a negative impact on the buying of a new home. Planning ahead is the best way to prevent your credit affecting your mortgage. Cleaning up your debt before applying for a mortgage will not only help your chances of being approved, but it may also decrease the amount of your down payment or your interest rate.
Joseph Kenny writes for the Personal Loans Store, where you can remortgage information and read the article on Mortgage Approval with Bad Credit .
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