What are interest rates today?
Last week I attended a seminar put on a Waterstone Mortgage about the current state of the mortgage industry. Wow, have there been some changes in that industry over the past year. One thing that really caught my attention was how much credit scores really affect interest rates.
As you may or may not know, the amount of mortgage you qualify for to buy a house is dictated by debt to income ratios, amount of down payment or equity, and credit scores. In fact, if you're preparing to purchase a new home you might check around a few different mortgage lenders to find the "best rate". I put "best rate" in quotes because your interest rate can be dramatically different based on your credit score.
For example, below is an illustration of how credit scores affect the interest rate on a conventional, plain vanilla 30 year fixed rate loan.
For the average consumer borrowing $175,000 for 30 years, the difference in payment between 4.875% and 7.250% is $267.70.
These pricing adjustments are a lot more dramatic than in past years. I recall when anything above 680 was considered A+ credit. Now the threshold is 740. The bottom line, is that you should do everything in your power to protect your credit score.
Genxfinance.com says that the number one thing you can do to help your credit score is to pay your bills on time. "This one is probably quite obvious, but it has to be mentioned right out of the gate. The single greatest factor that determines your credit score is your payment history. If you pay on time and continue to do so for years, this will lay a solid credit foundation. One thing you do have to keep in mind is that this goes beyond just paying your credit card, mortgage, or car loans on time. Even things such as utility bills, cell phone, rent, and so on will likely be reported if late. While these types of accounts don’t generally show up on your credit report if you’re in good standing, they usually will still show up as a blemish if you’re late (usually after 30 days late)." You can also read about their other suggestions to improve your credit by clicking here.
When lenders quote their daily interest rates keep in mind that there's often more to the story. The best rate shown may or may not be the rate that you end up with for your mortgage.