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Beginners Guide to Credit Scores

Brady Webb
September 29, 2024

Let’s take a look at the basics of credit scores and their guidelines. Currently, mortgage lenders refer to the following models for each of the following credit bureaus:

Why Your Credit Score is a Critical Factor for Mortgage Lenders

A credit score is a three-digit number that will determine the mortgage interest rate you’re offered, and also the length of time it will take to pay off a mortgage. Your credit score is very important to your mortgage lender in Florida because it affects your mortgage rate and the amount of money you’re going to borrow.

A lower credit score means you’re going to pay a higher interest rate on your mortgage loan, and you’ll need to borrow less money. A higher credit score will get you a lower mortgage rate, and more money to borrow.

So it’s important to understand that your credit score is a major factor in determining the mortgage rate you’ll receive and the amount of money you’ll be approved to borrow. Simply put, these credit scores are determined by a variety of factors. As a result, there are three primary ways to improve your credit score:

Pay off delinquent debts and outstanding accounts;
Maintain your revolving accounts and make regular payments;
Obtain new credit and manage it responsibly.

Why Does a Low Credit Score Lower Your Chances of Getting a Good Mortgage?

If you have a low credit score, you are considered a “higher risk” for mortgage lenders, who must be able to prove that you can make regular payments on time, plus cover all the costs of closing, including fees.

It’s a matter of risk management, which means mortgage lenders need to protect themselves, just as you need to protect your budget when you shop for mortgages.

How Your Mortgage Lender Assesses Your Credit Score

You can expect a mortgage lender to also assess your credit score as part of the loan application. They will also be able to include any other factors they deem relevant, to help them make their decision.

This is done on a case-by-case basis, depending on your specific situation, and the lender can request more detailed background information on your financial history.

Keep in mind that your credit score is just one factor that mortgage lenders use to assess whether or not to approve you for a mortgage loan.

The Bottom Line: Keeping Your Credit Score and the Mortgage Lenders Usage Up-to-Date

With your financial history being considered as part of the application process, it is important that you make sure your credit history (as well as your FICO® Score and credit reports) is being assessed by the most recent guidelines.

As previously mentioned, it is important to know the credit bureau that the lender is using for the credit report and to make sure your credit report is being based on the most recent rule set for your particular state.

How American Mortgage Solutions Can Help

If you are looking for a mortgage company in Cape Coral and beyond, then you have come to the right place. American Mortgage Solutions offers a wide range of services that can help you with all of your real estate needs, so get in touch with us today by calling (502) 327-9770 in Louisville or in Florida (239) 766-8344 and see how we can finance the home of your dreams!

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CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

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These materials are not from HUD, FHA, the USDA, or the VA. These materials were not approved by any government agency. They are independent of any government agency. We are not in any way affiliated with any organization listed or referenced within this website, including HUD/FHA/USDA/VA. The inclusion of various education, information, web links, or materials are not an endorsement of the Sender or any of its employees or business partners. For information directly from HUD/FHA, visit https://www.hud.gov/guidance For information directly from the VA, visit http://www.benefits.va.gov/HOMELOANS/ For information directly from the USDA, visit http://www.usda.gov/wps/portal/usda/usdahome?navid=GRANTS_LOANS