As Mortgage Rates Skyrocket, Credit Score Becomes Critical
The Federal Reserve has responded to skyrocketing inflation by raising rates, which has pushed up the cost to carry a mortgage to 12-year highs. Mortgage rates recently reached 5.27%, a huge departure from the 3% level seen just 6 months ago. The difference can result in tens of thousands of dollars in additional lifetime expense to carry the loan.
Many would-be home buyers are feeling squeezed out of the market, especially because home prices have been sticky despite rising loan costs.
What You Can Do
In this environment, consumers still have some influence over how much they pay for a mortgage. A key factor is one’s credit score because it will determine the level of interest your loan is priced at. A best practice before getting pre-qualified for a loan is to check your credit score. Every point counts, and will influence your monthly and cumulative payments.
If your credit score isn’t where you’d like it to be, there are a number of things you can do to bump it up.
Credit Score Tune-Up
Credit utilization refers to how much of the total amount of available credit you are using. The factor counts for 35% of your overall score. Asking credit card companies to raise your credit line will effectively reduce the percent of credit used, and boost your score. Also, services like Experian Boost™ give credit for certain on-time payments.
An estimated 25% of Americans find errors on their credit reports so it’s a good idea to review your report to ensure its accuracy. With fraud an ongoing concern, regular monitoring is a good idea even when not shopping for mortgages.
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