Mortgage rates are averages, but your personal rate depends on factors like credit history, income, and debt. A higher credit score can help you secure a lower interest rate, potentially saving tens of thousands over the life of a loan.
Generally, borrowers with top-tier credit scores (around 760–850) qualify for the lowest interest rates, while those with scores in the 620–659 range may face higher rates and monthly payments. Even small differences in credit score can affect your monthly payment and total interest over a 30-year mortgage.
Key Points:
- Lowest advertised rates usually require scores of 740 or higher.
- Scores of 620+ can qualify for conventional loans, but at higher rates.
- Credit scores reflect your history of repaying debt; better scores lead to lower rates and monthly payments.
Ways to Improve Your Credit Score:
- Pay bills on time.
- Reduce debt, especially credit card balances.
- Check for and remove errors on your credit report.
- Avoid opening many new accounts at once.
- Keep older accounts active to lengthen your credit history.
- Maintain a mix of credit types if needed.
Other Factors Affecting Your Mortgage Rate:
- Debt-to-income ratio: Aim for 36% or less.
- Down payment: Larger down payments often lead to lower rates.
- Loan term: Shorter loans can offer lower rates but higher monthly payments.
- Loan type: Fixed-rate vs. adjustable-rate mortgages can affect your interest costs.
Bottom Line:
Building and maintaining a strong credit score is crucial for getting favorable mortgage rates. Even small improvements in your credit can save significant money over the life of your loan.
