A Good Credit Score

A Good Credit Score

How Does My Credit Score Impact My Interest Rates?

Today’s financial market is much different than it was five or ten years ago. Back then, people could survive marginal credit ratings and still score good interest rates when applying for a loan. That isn’t the case, anymore. Since the market has seen a much larger number of foreclosures, lenders are becoming more conscious about who they lend their money to. In short, they are taking into account credit history and a person’s credit score to make their decision on most loans. Interest rates are also affected by a person’s credit score. How much of an impact does it have? That depends upon what kind of loan you are applying for.

Mortgage Lending
If you haven’t yet heard about the problems within the real estate market, then you should take a minute to read this article about mortgage credit lending   from BYU Newsnet. It breaks down some of the many problems that have plagued those folks in the real estate lending industry.

Mortgage lenders are currently cracking down on their lending and not allowing just anyone to borrow money. If you have a low credit score, then you may not even be able to qualify for a mortgage loan from many lenders. If they do process your application and give you approval, then you are looking at a lofty interest rate of over 7%. This can cost you a ton of money over a 30 year period.

That interest rate impact works both ways, though. If you are lucky enough to have a good credit score of 750 or above, then you can save money with a lower interest rate. That difference in credit score can cause a change in interest rates of more than a point.

Other Types of Borrowing
Though the mortgage is the type of loan that is most common, there is also the need for other loans in certain situations. In short, you might need to finance a vehicle, a boat, or your children’s education. In this case, it is even more important to have a high credit score. Since personal loans of this nature are much riskier for the bank, you will have to show that you are a safe bet for the lender.

You will notice that an excessively low credit score will disqualify you for many types of loan in today’s market. You may have to suffer through some hard times as you work to repair the credit score over time. Even if you do get lucky enough to qualify, the interest rates will make just about any type of personal loan look absolutely unreasonable.
It is more important today to have a great credit score than ever before. Because lenders are being burned by loan takers with bad credit, they are making it very expensive to borrow for people without an excellent credit score. If you want more information on credit scores and their impact on your interest rates, then be sure to read this article about credit scores and its effects on your interest rates.  from Inman News. 

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