Unlike a few years ago, there is much greater awareness among consumers and small business owners about credit scores and how lenders utilize them to make lending decisions and determine the interest rate they’re going to charge you.
With ads plastered all over the television for free credit report this, and credit monitoring that, the average person can’t help but have a greater appreciation that their own unique credit score is important.
Or do they?
Perhaps its less about our acknowledgment that a) we all have a credit score, and b) that its reviewed by lenders that we apply to for credit and more about a lack of understanding of the actual impact the score can have in real dollar terms.
Much of what you read on the internet with respect to qualifying for a mortgage speaks to the minimum credit score requirements for certain classifications of lenders which is totally relevant to being approved for financing.
But what you don’t see discussed very much is the potential interest rate penalty you’re still incurring even if your lender of choice approves you for a mortgage.
Using the fico scoring scale, a credit score of 650 may be the minimum requirement by a mortgage lender for you to qualify for their program, but it certainly doesn’t guarantee you will receive the best possible rate.
Higher scores have the potential to garner lower interest rates due to lower perceived risk. And even small interest rate discounts of half to one percent can equate to hundreds of thousands of dollars in savings over a lifetime not to mention the additional investment returns that could be generated if these savings were invested over time.
The key point here is to not just be satisfied with getting a mortgage. The goal should be to get the best possible mortgage because the savings over 20 or 30 years can pay for vacations, eduction for your children, retirement spending, etc.
While all lenders will have different requirements, you can be assured that a higher credit score is better than a lower one. And if you personal credit score is lower than 800, there is room for improvement that can result in savings.
By putting the work in to understand where you’re credit is at right now, and the necessary steps to improve it, you’re going to potentially generate substantial benefits over time.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel