One of the most important things you will ever do as an adult is apply for a mortgage loan. Buying a home is a multi-faceted experience that will teach you a great deal more about how to handle your finances than any business course ever could. One factor that can have a huge impact on your home loan is your credit rating, and if you have never checked your credit report or requested your credit score, then the American dream of owning a home may be out of your reach before you know it.
What is a Credit Rating?
A credit rating is a compilation of all your credit activity within a given month. It includes reports from your landlord, your credit card companies, and from retail stores where you carry a credit balance. Credit bureaus such as Experian, TransUnion, and Equifax then create your credit rating based on information such as how much you owe, whether or not you pay late, and whether your account is in good standing. The better your rating is, the higher the score.
How a Credit Rating Affects Your Mortgage
Your credit rating can affect everything about your mortgage loan, from whether or not the bank will even lend to you to the type of mortgage rate you’re offered. If you have a low credit score that’s the result of late payments and past-due accounts, you will end up paying a higher monthly payment, as well as thousands of dollars in interest over the life of the loan.
If you’re planning to buy a home soon, then checking your credit rating should be one of the first steps you take. Not only will this give you a chance to clean up your credit and raise your score, but it will also allow you to verify that all the data is accurate so that you do not become financially responsible for any fraudulent charges.