What does a 1 point difference in your credit score mean?

Most homebuyers think about their credit in terms of good or bad. Others have their score more nailed down, “it’s around 680” or “it’s above 700”. Yet knowing your specific score and planning ahead with your lender will provide you significant benefits.

As little as a 1 point difference in your credit score can impact you in significant ways.

• The mortgage rate could be as much as 1/2% higher
• The loan might require mortgage insurance
• It could be the difference between approval and denial

In the mortgage industry credit scores are evaluated in tiers. For example 680-700, 701-720, 721-740, 740 and above. The interest rate, the cost for the mortgage insurance, and the ability to qualify all depend upon which tier you fall within (to name just few).

Having a 679 credit score versus a 680 credit score, can increase your rate by as much as 1/2%.

So where should you start?

Planning for your next purchase is the key.

Your lender should work with you in advance to help you obtain the next credit tier. Ideally this should be happening before you go under contract. Simple things such as paying down a credit card by even a small amount or dropping off somebody’s credit card as an authorized signer can help.

Your lender should provide this service for free and it shouldn’t take more than a few days, depending upon the circumstances.

If you’re wondering where you fall and how to best prepare your credit score for the next higher tier, let us know. We’re happy to help and the service is always free of charge.

 
Stephanie & David Cramm
(303) 931-6776