Your credit score affects mortgage, more

By Erin Bendig

Becoming a homeowner has become increasingly more challenging for many, with monthly housing payments recently hitting a record high of $2,563 — a 29% increase from 2022. Sky-high mortgage rates, which are expected to keep climbing, have left both homebuyers and owners feeling increasingly pessimistic about the housing market outlook.

So, if you’re in the market for a mortgage or a refinance, it’s more important now than ever to ensure you can secure the lowest mortgage rate possible. One way it can be done is by prioritizing a good credit score.

[Ed. Note: A high credit rating can also reduce your homeowners’ insurance, car insurance and mobile phone contracts. In addition, according to NerdWallet, “senior housing, assisted living and continuing care retirement communities also may use credit histories or scores to evaluate applicants.”]

Credit score impacts mortgage rates

Lenders take into account a variety of factors when determining the interest rate on your mortgage, including down payment, loan term and the price of the property.

However, the biggest factor determining your mortgage rate is your credit score. Most lenders will take into account your FICO score, which can range from 300 to 850.

• 800 or higher: Exceptional

• 740-799: Very good

• 670-739: Good

• 580-669: Fair

• 579 or lower: Poor

To qualify for a mortgage loan, you’ll likely need a score of at least 620. However, having a higher score can ease the financial burden of a mortgage, as it can help get you lower rates. And the knock-on benefits continue — securing a low mortgage rate can help lower your monthly payments substantially, according to this data from MyFICO:

Say you start with a credit score of 620639. Here’s how much you’d save over the course of your 30-year fixed mortgage of $350,000 by boosting your credit score:

—If your score changes to 640-659, you could save an extra $47,086.

—If your score changes to 660-679, you could save an extra $83,473.

—If your score changes to 680-699, you could save an extra $101,343.

—If your score changes to 700-759, you could save an extra $116,000.

—If your score changes to 760-850, you