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This article was written to help you discover how to lower your mortgage interest rate by improving and/or repairing your credit score. Lenders look at your credit score to help them identify the mortgage rate that you qualify for when you are applying for a home loan.
Few people realize that there are various things you can do to repair bad credit, and a few tips can go a long way to help you avoid further damaging your credit.
Continue reading to find out how you can improve or repair your credit score! If you still have questions after reading this page, feel free to give us a call at 800-211-4940 or click here to request more information today!
Ways to Improve Credit
Understanding how to lower your mortgage interest rate means being aware of your credit score. Credit scores range from 300-850, where anything over 700 is good and anything under 600 needs improvement.
Credit scores are simply a numerical ranking of your credit performance. The best way to look at a credit score is like your evaluation for promotion.
There are many parts to this evaluation like, performance, conduct, physical fitness, marksmanship, time in service, and time in grade. Your Non-Commissioned Officer or Officer in Charge then weighs each factor in accordance with its importance and determines your final evaluation for promotion.
Credit scores are no different and look at the following factors:
- Payment History – 35% of your overall credit score is determined by your payment history, which is the single most impactful factor of your credit score.
- Outstanding Debt – your debt holds a 30% weight in your overall credit score. Carrying balances of less than 35% of your available credit limit is ideal. Balances that use 70% or more of your credit limit are having a negative impact on your score.
- Account Age –15% of your overall credit score is based on the length of time accounts have been open and established. It is helpful to have accounts with a long history reporting to the credit bureaus.
- Inquiries and Credit Diversity – 10% of your overall credit score is represented by these factors. Be sure you aren’t authorizing lenders to pull your credit report needlessly and that your debts are spread among various loan products (credit card vs. car loan).
The factors above are scored on a curve type system where your performance is compared directly to other individuals. Therefore to stay a step ahead when learning how to lower your mortgage interest rate, it begins and ends with your credit score.
Credit Repair Strategies
If you’re searching for ways to improve your credit , you should know that there are things you can do to repair it. Lenders look at your credit score when you apply for a VA home loan – or any home loan for that matter – as one of the factors in determining your mortgage rate.
A higher credit score means you are a good credit risk and will likely qualify for a lower interest rate on your home loan. . Learn more about the things our customers have done to protect their credit.
While learning how to lower your mortgage interest rate, its important to find out if you’re helping or hurting your credit score. You can figure this out if you use our credit checklist as a guide.
Free Annual Credit Report
You are entitled to receive a free copy of your credit report from each of the nationwide consumer credit reporting bureaus every year. To obtain your credit report, visit http://www.annualcreditreport.com/.
This is an official site sanctioned by the credit bureaus to provide you with free access to your report. It’s a good idea to put this on your calendar and submit your request for your free credit report annually. This information is very useful when trying to find ways to improve your credit and will serve you well throughout your lifetime.
Obviously, the lower your debts, the better off your debt-to-income ratio will look to lenders. However, we all need to incur debt to own big-ticket items like houses and cars.
Not all debt is bad.
It is simply important to manage debt carefully. It is also worth noting that, unlike conventional mortgage lenders, lenders of VA home or refinance loans take into account the expenses of owning a home, including utilities, for example, in considering your debt-to-income ratio. Learn more about how your debt-to-income ratio plays a role in qualifying for a VA mortgage.
If you have any questions about how to lower your mortgage interest rate or anything else you feel we can help you with, don’t hesitate to give us a call at 800-211-4940.
You can also get the process started by filling out our online pre-application form for a VA mortgage loan.
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