To talk about credit scores, it's one of the most important factors which needs to be considered for almost every kind of loans. Nowadays, most of the people are aware of this number thing. Let me just give you an idea of the term 'Credit Score' for them who are new in this field. It is a 3-digit number calculated using a mathematical formula based on the credit report information. And this report contains the history of whether you have paid your bills on time, your willingness to repay your debts, any open credit, your employment record and all such information that will affect your credit worthiness.
The basic concept of credit score is to determine who will qualify for a loan. When qualified the next two crucial factors will be the interest rate and the credit limits. Based on this score, you will be judged by the lenders for any future investments. A high credit score means that the chance of getting the mortgage loan approved is much more, and possibly with lower rate of interest. They are more likely to get prompt responses from the lenders, who could also propose low down payments. You can also get an offer of a higher loan amount, provided you have a bit of luck too. Naturally, with low credit score you are prone to rejection than approval. Here the risk factor involved increases a lot which in result affects the mortgage financers and refuse to approve the loan, to be on a safer side.
The credit scoring system is decided by the three major credit bureaus, namely Equifax, Experian and TransUnoin. The credit scores can be categorized as low or high as defined by the mortgage industry. Generally, the range of 760 and above is considered the highest tier. You are well placed here in the market of getting loans and need not worry. If your score lies in the 600 to 700 range, you won’t be having any problem in getting the loan but the interest rate would be higher. But a score around 500 has the least possibility of loan approval. You have to work hard and shop around in order to qualify for the mortgage loan.
As you know, this three figured digit not only affects the mortgage rates but also other factors like applying for a car loan, getting a student loan, how much you have to pay credit and the insurance policies. So it’s a wise decision to keep checking your debt, do the payments and update your credit score for better loan opportunities.
Please feel free to give your comments and valuable suggestions to cover up whatever I have missed out here. All comments will be highly appreciated.
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