May 26

Credit Scoring

larry-200x285Credit scoring is a numerical rating system that tells lenders what kind of credit risk you are. This rating system is becoming more and more important and most lenders are now setting the interest rate you pay based on your credit score.

It follows then, HIGHER CREDIT SCORE, LESSER INTEREST.

For example, one borrower scoring in the low 600’s pays an interest rate of 6.5% on his 5 YEAR mortgage. His friend scoring in the low 700’s gets the same mortgage at 5.5%. The higher credit score will pay over $10,500 less interest on his $200,000 mortgage over just the next 5 years AND pay off the mortgage over 4 years sooner.

Thinking of applying for a mortgage? Before you do, ask your mortgage broker to coach you on how to maximize your credit score. For more background on Credit Scoring check out these links:

Trans Union – Credit Scoring
Equifax – Credit Scoring