BAD CREDIT MORTGAGE RATES

You may find it more difficult to secure a mortgage with a favorable interest rate if you have bad credit. Lenders often view borrowers with bad credit as a higher risk, and as a result, these borrowers may be charged higher interest rates on their mortgages. In this article, we’ll look at what bad credit is, how it can affect your mortgage rates, and how you can improve your credit score.

• WHAT IS BAD CREDIT?

The lender uses bad credit to determine the risk of lending to a borrower. If your credit score is higher, then there will be a low chance of any risk to the lender, and the better the interest rate you will likely receive on your mortgage. A person’s credit score is a three-digit number ranging from 300 to 850, based on her credit history. A score of 600 or below is generally considered to be bad credit. Factors that can affect your credit score include:

1. Late payments: If you have a history of missing or paying bills late, it can negatively impact your credit score.
2. High balances on credit cards: Carrying a high balance on your credit cards can also harm your credit score.
3. Recent credit applications: Every time you apply for credit, it can impact your credit score, especially if you apply for a lot of credit at once.
4. Length of credit history: A long credit history can improve your credit score, while a shorter history can lower your score.

• HOW DOES BAD CREDIT AFFECT MORTGAGE RATES?

With good credit, securing a mortgage with a favorable interest rate can be easier. When you apply for a mortgage, your credit score is one of the factors that the lender will consider when determining your interest rate. The higher your credit score, the decrease the risk to the lender, and the better the interest rate you will likely receive on your mortgage.

With bad credit, you may be considered a higher risk to the lender, and as a result, you may be charged a higher interest rate on your mortgage. This can add thousands of dollars to the cost of your mortgage over the life of the loan. For example, if you take out a 30-year fixed-rate mortgage for $200,000 at an interest rate of 4%, your monthly mortgage payment will be $955. If your interest rate is raised to 5%, your monthly mortgage payment will increase to $1,073, an extra $118 per month.

• HOW TO IMPROVE YOUR CREDIT SCORE?

If your credits are bad and you want to improve your credit score, there are a few things you can do:

1. Bills payment on time: Late payments can greatly impact your credit score, so make sure to pay your bills on time.
2. Keep your credit card balances low: High balances on your credit cards can also harm your credit score, so keep your balances low.
3. Limit your credit applications: Every time you apply for credit, it can impact your credit score, so try to limit the number of credit applications you make.
4. Check your credit report for errors: Review your credit report for errors and dispute any errors you find.

It’s also a good idea to work with a reputable credit counselor or financial advisor who can help you develop a plan to improve your credit score. With time and effort, you can improve your credit score and qualify for a more favorable interest-rate mortgage.

CONCLUSIONS:

In conclusion, securing a mortgage with a favorable interest rate can be easier if you have good credit. It’s also a good idea to work with a reputable credit counselor or financial advisor who can help you develop a plan to improve your credit score. With time and effort, you can improve your credit score and qualify for a more favorable interest-rate mortgage.