Building Healthy Credit
Credit scores range from 300 to 850, with 850 being a perfect credit score. And, by the way, don’t be alarmed if you don’t have a perfect score. The fact is, most people don’t!
The following chart illustrates how much your credit score affects the annual percentage rate (APR) on a 30-year fixed mortgage, with a loan amount of $300,000.
| 30-Year Fixed Mortgage — $300,000 Loan Amount | ||
| Your FICO® Score | APR | Monthly Payment |
| 760 – 850 | 4.082% | $1,446 |
| 700 – 759 | 4.304% | $1,485 |
| 680 – 699 | 4.481% | $1,517 |
| 660 – 679 | 4.695% | $1,555 |
| 640 – 659 | 5.125% | $1,633 |
| 620 – 639 | 5.671% | $1,736 |
In this example, if you have a credit score of 630, your total cost including interest over 30 years would be $624,960. Conversely, if you have credit score of 780, your cost over the life of the loan is only $520,560. That’s a savings of $104,400!
Just imagine what you could do with all that money!
Remember, interest rates change daily and this example does not include fees or closing costs associated with your loan, or any additional risk fees required by some lenders. This simply shows you how much you can save by improving your credit score.
The key is, if your average credit score is below 640, you definitely want to improve your scores before you shop for a mortgage.
While your credit score has a tremendous effect on your ability to get the mortgage loan you want, there are many other factors involved in the loan approval process. The amount of your down payment, employment status, debt-to-income ratio, savings on hand for closing costs, etc. all come into play.
