Lower Mortgage Rates For Lower Credit Score Applicants: A Step-by-Step Guide

04-01-2014 | Dojo |

If you want to get the best mortgage rates, the very best thing that you can do is to raise your credit score. A better credit score will allow you to get a lower interest rate on your mortgage even if you don’t put down a huge down payment. When you need to lower your credit score, you can follow these steps to help you score a great deal on your mortgage interest rate.

1. Eliminate as Much Large Debt as Possible

If you are applying for a large loan like a mortgage, one of the worst things that you can have on your credit report is a bunch of pre-existing debts that are for large amounts. When you already have several significant monthly payments, it may make a lender nervous about your ability to make your mortgage payments on time. Try to eliminate as much of your large debts as possible before you apply for a mortgage.

credit score

2. Make Your Payments on Time

No matter how large or small the debts you have are, you need to make sure to always pay all of them on time. When you have a long history of consistently paying all of your debts promptly, it will significantly raise your credit score. Even one late payment will stay on your credit report for six years from the date that you missed the payment. Even just one late payment can negatively impact your credit score. Do your utmost to ensure that you have an impeccable payment history to score a low interest rate on your mortgage.

3. Fear a Judgement

Much worse than a history of missed payments, a county court judgement (CCJ) is one of the worst things that you can have on your credit report. Like a missed payment, a CCJ will stay on your credit report for six years. If you already have a CCJ on your credit report, then you will probably need to sit tight and wait for it to drop off before you apply for your home mortgage. If you are forced to do this, don’t bemoan your fate. You can make good use of the delay by saving up a large down payment for your home, which will help you to lower the interest rate on your mortgage even further.

4. Compact Your Credit

If you have credit cards that you never use, just having them open can lower your credit score. You need to close as many lines of credit as possible before you apply for your mortgage in order to score the best deal on your interest rate.

5. Stabilize Your Life

Moving around or changing jobs a lot will lower your credit score. If you want to get the best interest rate, then show a history of several years at the same residence and in the same job to demonstrate stability to lenders.

If you follow these five steps, you should have no trouble scoring a great rate on your home mortgage. It is not hard to get a good credit score. Simply be a responsible borrower and keep your accounts current, and lenders will see you as a great borrower worthy of a low interest rate.

Recent Comments

  • http://Dojo

    January 4, 2014 at 8:37 am

    Thank you, Lindsay for the great advice. I don feel like getting a mortgage should be something properly planned and carefully done. By having little debt and being a good ‘payer’ you can clearly get a better deal.

  • July 12, 2018 at 4:21 pm

    […] not start with the best possible situation then?  This does not necessarily mean choosing the lowest rate, […]

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