Mortgages and Credit Ratings
Having a good credit rating is the key to getting the best rates a lender can offer. Mortgage lenders want to make sure that you are financially able to afford and maintain the home you are going to buy.
When applying for a mortgage, the first thing your potential lender will want to do is remove your credit report. Consumer credit reporting agencies (Equifax®, ExperianMT, and TransUnion®) collect information from nationwide creditors to develop your credit score. Your FICO score can range from a low of 300 to a perfect 850.
The minimum credit score needed to buy a home is between 580 and 620, with a good to excellent FICO® a credit score between 670 and 850 can save you thousands of dollars over the life of your mortgage.
There are two types of debt: installment credit and revolving credit.
Revolving credit is a line of credit with a fluctuating balance, like a credit card. While you can pay credit card payments every month, you can also add to the balance at the same time.
The other type of debt is installment credit. Installment credit is a fixed amount of money borrowed with a fixed monthly payment and a repayment date. A mortgage, student loan, or personal / business loan are all types of installment credit.