Why Your Credit Score is so Important!

When Higher is Lower

Buyers need to know their credit score before writing a contract to buy a home so they'll have a realistic idea of what their payment will be. Most lenders quote rates based on the best credit score. If a buyer has a lower than "A" credit score, the rate goes up in increments that could dramatically affect the payments.

There is an inverse relationship between the credit score and the interest rate charged. The higher the score, the lower the rate will be. You can see from the chart, this lender quoted their best rate for a credit score of 760-850. However, this lender's minimum acceptable score of 620-639 would have to pay 1.5% higher interest. In the example below, it makes almost $200 a month difference. It is critical to know your credit score before you make a decision to buy a home.

30 year Fixed Rate Mortgage - $200,000 Loan Amount
FICO Score
APR
Monthly Payment

760-850
4.466%
$1,009

700-759
4.688%
$1,036

680-699
4.865%
$1,057

660-679
5.079%
$1,083

640-659
5.509%
$1,137

620-639
6.055%
$1,206

Buyer's logical first step is to get pre-qualified or pre-approved with a mortgage lender prior to looking at homes. This gives the buyer the confidence of knowing how much mortgage is available and if they can expect the best interest rate which will lower their payment. Other benefits include bargaining power, quicker closing and the chance to discover any issues on their credit report that need to be corrected before going on contract.