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High Credit Score = Low Mortgage RatePosted by Jim Berg Team on Tuesday, September 4th, 2012 at 3:35pm.
Credit scoring was developed in the 1960s as a means to determine whether or not consumers were
likely to repay their loans. The score ranges from 350 to 850 with a higher score being extremely favorable. Essentially, a high credit score translates into lower interest rates for the borrower.
There are five factors that comprise the credit score. Payment history accounts for 35% of the score; outstanding credit balances have a 30% impact; credit history makes up 15%, type of credit factors at 10%; and inquiries influence the score by 10%. This gives the lender a snapshot of an individual's sense of
financial responsibility and ability to pay back loans.
There are many quick tricks to improve the credit score. If a borrower has to pay a higher interest rate to close a loan, the tarnished credit rating will begin to improve once mortgage payments are made on time and in full. If that is the case, a good loan officer will be on the watch to alert the borrower when an opportunity arises to refinance and get a lower interest rate.
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