{"id":50940,"date":"2021-11-10T16:20:37","date_gmt":"2021-11-11T00:20:37","guid":{"rendered":"https:\/\/www.movoto.com\/blog\/?p=50940"},"modified":"2026-03-11T08:41:59","modified_gmt":"2026-03-11T15:41:59","slug":"how-your-credit-score-impacts-mortgage-payments","status":"publish","type":"post","link":"https:\/\/www.movoto.com\/blog\/how-your-credit-score-impacts-mortgage-payments\/","title":{"rendered":"How your credit score impacts mortgage payments"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">If you have a mortgage payment or plan to apply for one, your <\/span><a href=\"https:\/\/www.movoto.com\/foundation\/how-does-your-credit-score-affect-your-mortgage-as-a-buyer\/\"><span style=\"font-weight: 400;\">credit score is a significant factor in your mortgage<\/span><\/a><span style=\"font-weight: 400;\"> payments. When you take out a mortgage, your credit score is one of the main factors lenders use to decide the amount they\u2019ll lend you. Your credit score can also <\/span><a href=\"https:\/\/www.movoto.com\/blog\/different-mortgage-loan-terms-mean\/\"><span style=\"font-weight: 400;\">influence what type of mortgage<\/span><\/a><span style=\"font-weight: 400;\"> options are available to you and the interest rate on your loan. With a high credit score of 700 or above, it will be easier for you to qualify for mortgages with low-interest rates.<\/span><br \/>\n<span style=\"font-weight: 400;\">With a credit score below the average, say 580-670, there may be other ways to get financing besides taking out a home equity line of credit or getting an unsecured personal loan. Do you have a mortgage payment or plan to have one in the future? If so, how strong your credit score is will impact what you pay. Having a good credit score can <\/span><a href=\"https:\/\/www.forbes.com\/sites\/alyyale\/2020\/01\/08\/heres-how-much-increasing-your-credit-score-can-save-you-on-a-mortgage-credit-card--more\/?sh=7537b6472e47\"><span style=\"font-weight: 400;\">save homeowners hundreds<\/span><\/a><span style=\"font-weight: 400;\"> of dollars per month on their mortgage payments.\u00a0<\/span><\/p>\n<h2><b>Determining mortgage rates<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Based on your credit score, you may apply for a better <a href=\"https:\/\/www.movoto.com\/blog\/4-reasons-to-use-a-mortgage-interest-calculator\/\">interest rate<\/a> than others who have the same type of loan.\u00a0 For example, if you take out an adjustable-rate mortgage (ARM) with an initial interest rate of 5% and your credit score is 620, your initial interest rate would likely be 8%. If you have a credit score of 740 or higher, then based on current laws for lending practices in the U.S., you might qualify for an ARM with an initial fixed interest rate of 4%.<\/span><br \/>\n<span style=\"font-weight: 400;\">A mortgage interest rate is<\/span> <a href=\"https:\/\/www.consumerfinance.gov\/about-us\/blog\/7-factors-determine-your-mortgage-interest-rate\/\"><span style=\"font-weight: 400;\">one thing<\/span><\/a><span style=\"font-weight: 400;\"> that lenders use to determine the starting point for your monthly payment. Another factor is how much money you\u2019re borrowing. Each lender has its way of arriving at this overall rate. At the same time, the general formula for figuring out your mortgage interest rate is complicated. More important is how this affects your <\/span><a href=\"https:\/\/www.investopedia.com\/articles\/investing\/080713\/how-banks-set-interest-rates-your-loans.asp\"><span style=\"font-weight: 400;\">monthly payments and the general terms <\/span><\/a><span style=\"font-weight: 400;\">of your loan.<\/span><br \/>\n<span style=\"font-weight: 400;\">If you plan on getting a mortgage, it is essential to know that your credit plays a critical role in determining your interest rate. If someone has good credit, they are more likely to repay their loans on time, and banks can lend them more money. Banks may even be willing to offer a lower interest rate on a loan since their risk is reduced. Lenders will look at various factors when determining the terms they are ready to provide for borrowers with multiple levels of credit scores.\u00a0<\/span><\/p>\n<h2><b>Credit and your Mortgage Interest Rates<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">There is a strong correlation between your credit score and the interest rate on your mortgage. If you have bad credit, the bank or lending institution will assume that you are more likely to default on your payments and require you to pay higher interest rates to compensate. The most used retail credit score is a <\/span><a href=\"https:\/\/www.creditkarma.com\/advice\/i\/good-fico-score-range\"><span style=\"font-weight: 400;\">FICO score which ranges<\/span><\/a><span style=\"font-weight: 400;\"> from 300-850, with 850 being excellent credit and 300 being terrible credit.\u00a0<\/span><br \/>\n<span style=\"font-weight: 400;\">Someone approved for a 30-year fixed-rate loan at a 3.8% interest rate might pay $100,000 less over the life of their loan compared to someone approved for a 30-year fixed-rate loan at a 4.5% interest rate. If you had lower credit scores, your mortgage interest rates could be higher than 6% or more. <\/span><span style=\"font-weight: 400;\">Some institutions rely on <a href=\"https:\/\/www.movoto.com\/blog\/how-long-does-it-take-to-get-my-credit-ready-to-buy-a-home\/\">FICO scores<\/a>; others do not rely on these scores alone when offering mortgages for their clients. Instead, they might look at other factors, such as your income and assets.<\/span><\/p>\n<h2><b>Building a Good Credit Score<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">To have increased chances of being approved for a mortgage, building a good credit score is essential. A good credit score will be between 650 and 700. Anything above 500 is considered ok; below this number means you need to build your credit more. You can achieve a good credit score by following these steps.<\/span><\/p>\n<h4><b>1 &#8211;<\/b> <b>Pay bills on time<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The first step in learning <\/span><a href=\"https:\/\/www.movoto.com\/blog\/7-ways-to-boost-your-credit-score\/\"><span style=\"font-weight: 400;\">how to build a good credit score<\/span><\/a><span style=\"font-weight: 400;\"> is paying all of your bills on time. If you pay any utility bill late, the company is entitled to charge you as much as $39 per incident as well as additional fees that vary by state and region. This will lower your overall credit rating and make it more challenging to get approved for a mortgage loan.<\/span><\/p>\n<h4><b>2<\/b> <b>&#8211; Maintain low credit card debt<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">Another way you can build <\/span><a href=\"https:\/\/www.movoto.com\/blog\/7-ways-to-prepare-for-a-mortgage\/\"><span style=\"font-weight: 400;\">good credit <\/span><\/a><span style=\"font-weight: 400;\">is by making sure that your overall credit card debt remains consistently low. Ideally, once your balance on each of your cards reaches $500 or less, continue to pay it off in full every month. Any money you owe on the card will be reflected in how lenders view your ability to repay any debts that might result from taking out a home loan.<\/span><\/p>\n<h4><b>3 &#8211; Don&#8217;t apply for new credit often<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">A very effective way of building up <\/span><span style=\"font-weight: 400;\">a good credit score<\/span><span style=\"font-weight: 400;\"> is not applying for too many different credit cards or loans. Most Americans have several credit accounts, and lenders like to see stability and consistency in your behavior. By not applying for many new credit products throughout the year, you&#8217;ll be able to maintain a good score even as you go about your life and make regular purchases on existing lines of credit.<\/span><br \/>\n<span style=\"font-weight: 400;\">Your <\/span><a href=\"https:\/\/www.investopedia.com\/articles\/personal-finance\/031215\/how-mortgages-affect-credit-scores.asp\"><span style=\"font-weight: 400;\">credit score impacts your mortgage payments<\/span><\/a><span style=\"font-weight: 400;\">. A good credit score will save you money by giving you a lower interest rate on your mortgage, but it takes time to build up that high of a score. Start building now by using the tips in this blog for establishing and maintaining an excellent credit rating over the long term. So you\u2019ll have access to low rates when it comes time for home buying or refinancing. If you want additional information about staying on track with your finances or if you need <\/span><a href=\"https:\/\/www.movoto.com\/\"><span style=\"font-weight: 400;\">Movoto\u2019s<\/span><\/a><span style=\"font-weight: 400;\"> help for any of your real estate needs, feel free to contact them today.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you have a mortgage payment or plan to apply for one, your credit score is a significant factor in your mortgage payments. When you take out a mortgage, your credit score is one of the main factors lenders use to decide the amount they\u2019ll lend you. Your credit score can also influence what type of mortgage options are available to you and the interest rate on your loan. With a high credit score of 700 or above, it will be easier for you to qualify for mortgages with low-interest rates. With a credit score below the average, say 580-670, [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":51325,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[211,266,63,227],"tags":[170,171,172,86],"class_list":["post-50940","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-credit-repair","category-finance-mortgage","category-finance","category-mortgage","tag-credit-history","tag-credit-repair","tag-credit-score","tag-mortgage-rates","post--single"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How your credit score impacts mortgage payments<\/title>\n<meta name=\"description\" content=\"When applying for a home loan, your credit score is a critical for your mortgage rate. 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