How Your FICO scores affect your Interest rates and monthly payments

Facebooktwittergoogle_plusredditpinterestlinkedinmail

We are buying a brand new home. We have watched it being built from the foundation up! Taking plenty of pictures and learning as we go so we can avoid costly home repairs, hopefully, by the do-it-yourself method. Being handy around the house can save you a ton of money!

For many of us IQ is three digits and has a lot to do with our eventual position in the game of life, BUT your 3 digit credit score also has an immense bearing on your life’s comfort and quality.

The table that you see below shows you what 30 year fixed mortgage rates you can anticipate securing if your FICO credit score falls within a specified range. Our FICO credit score is 745 which would give us a 3.4% interest rate as of August 1, 2012. If we were only 15 points higher at the 760-850 range we would get a better rate of 3.18%. This would decrease our monthly payment from $710 to $690.

Understand that this payment of $690 per month for a $160,000 loan does NOT include hazard insurance or property tax. In our neck of the woods, homeowner’s insurance and property tax run you an extra $250 per month which would make the total payment equal to $940 per month.

Notice the very last graph which compares your risk to a lender with borrowers having different FICO credit scores.

What this means is that the majority of lenders would consider buyers with a score of 745 to be low risk because only 5% of people with this score get into serious credit trouble.

What precisely is meant by serious credit trouble? In this case, it is the percentage of borrowers with a 745 credit score who reach 90 days past due or worse (bankruptcy, account charge-off) on any credit account over a two-year period.

Again the 5% means that only 5 out of 100 borrowers with this particular credit score would ever reach 90 days past due, bankruptcy, or account charge-off. Account charge-off is where a debtor will take what they can get from an irresponsible borrower.

Also the higher your credit score, whether it be FICO, Experian, TransUnion, or Equifax, the less likely it will be that you would EVER miss any kind of payment. This is a huge factor for any potential lender to consider and accounts for 35% of your credit score calculation!!

Finally, for reasons unknown to this writer some credit card companies do NOT report your credit limits to the credit bureaus.  I think this can possibly hurt your credit score since potential lenders are not certain how much credit has been issued to you.

FICO Credit Score’s Influence On Your Monthly Mortgage Payment
Facebooktwittergoogle_plusredditpinterestlinkedinmail

14 comments on “How Your FICO scores affect your Interest rates and monthly paymentsAdd yours →

  1. We were stuck a little while with a mortgage lender that would only pull credit history from Transunion. I am guessing this particular company only pulled your credit history from TU because it was cheaper for the company to do so. We dumped them for Prime Source which gets your credit history from Experian, Equifax and TransUnion

  2. Our experience has been any credit score of 720 or higher will get you the lowest interest rates available. Steer clear of prime source . Primesource adds about .5 % since they are not a direct lender. We have a credit score of 790 and they still wanted to charge us 4.1%. We got 3.5% at a local bank.

    Credit scores like 691 692 690 695 696 697 698 699 700 701 702 710 711 712 713 714 715 716 718 719 703 704 705 706 707 708 709 693 694 are decent credit scores but will only get you interest rates around 4.2%

  3. I have experian credit score that has ranged from 812 to 830. My wife also has an excellent equifax credit score between 775 and 790. We applied online at J P Stone Community Bank for a 250,000 dollar home built by the French Brothers. J P stone never replied to our loan request online or the telephone. We ended up getting 3.4% from Pioneer Bank in Roswell!

  4. 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741 742 743 744
    What Do these three digit numbers have in common? They are FICO credit scores that will get you Almost the best home mortgage interest rates available. 745 or higher gets you The best interest rates available last time I checked . However , be aware that some lenders do not even consider your FICO credit score. Our lender only looked at a combination of experian, equifax, and transunion.

  5. The Credit Dude reports 4 items that are commonly overlooked that can lead to a significant lowering of your credit score AND kill your chances of moving into the home of your dreams………

    closed accounts reported as open
    duplicate accounts
    overstated revolving balances
    collections

    Closed accounts reported as open we’re easy for me to fix by talking to an equifax agent but impossible to get removed at experian in McAllen Texas.

    1. How does kroll credit calculate scores? The answer to this common question is that Kroll Factual Data does NOT calculate credit scores. That is a service provided by Experian, Equifax, and Transunion.

      Kroll Factual Data is a provider of independent verification services to mortgage lenders, banks, credit unions, and property management firms. What does this mean? They check for identity discrepancies, Social Security number fraud, and anything else that might point to an identity cover-up which might show that somebody with good credit scores still might be a risky borrower for a lender.

      First time home owners will often do about anything to qualify for a mortgage including cleverly concealing information that would disqualify them from a mortgage approval. Kroll Factual Data helps to detect this type of fraudulent activity and provide that information to potential lenders like banks or mortgage companies like PrimeSource who do not want to take any chances with borrowers who might default early or at all.

      1. Speaking of credit unions, did you read article in Pampa News about Erin Dawn Trevathan stealing more than $400,000 from credit union? She was the only loan officer there and was busted in an audit. They only gave her a 3 year jail sentence for ripping off almost half a million dollars. Did I hear correctly that the editor of newspaper Tim Howsare did not want to print article because of some sort of conflict?

  6. What is a charge off? It is when a credit card company gives up on unaccountable people who will not pay off their balance. They try to collect as much as they can and then write off the account.
    Unfortunately, some people in the United States with two or more charge-offs are still living High on the hog. Many of these people are living better than hard-working people who choose not to have credit cards and be responsible.
    People with a credit card charge-off should be in debtors prison and not driving a Nissan Maxima or accepted for a mortgage to live in a nice house.

  7. The myFICO website states “The FICO Score is the standard credit score in the US, used in more than 90% of lending decisions.”

    This has NOT been the case in our lending experiences for a car and two home mortgages. In all three cases, the credit score that was used was the average of the top two scores from Equifax, Experian, and TransUnion.

    I think myFICO just makes up the claim that the FICO credit score is used in 90% of all lending decisions. Think about it! How would they even know such a claim?

  8. A common question is ” Can we get a home loan with a credit score of X?” The answer is is yes unless your credit scores are less than,say, 625. So most folks can qualify for a home mortgage, But the lower your credit score the higher your interest rate will be.

    We worked our butts off to get our Experian and Equifax credit scores over 800 which got us a 30 year fixed mortgage rate of 3.4 %. Getting the mortgage pushed our credit scores down 30 points because of the significant increase in our overall debt.

  9. Bo Majors at oskie.com does a very nice job of explaining the kind of mortgage rate you can get with a particular credit score. Majors takes a great deal of pride in making sure first time home buyers are not getting in over their head and understanding what is disclosed at home closing

  10. FICO credit score is not so important these days it seems. When we bought our Honda Civic, the finance people only looked at our highest score which was Experian(101 points higher than FICO)

  11. In the past year we have purchased both a home and a car. In neither case have the lenders checked our FICO score. Experian and Transunion seem to be more important today.

  12. Very surprised that financial writer Alex Veiga would publish the harmful information that a borrower with a very low FICO score of 580 could qualify for an interest only home mortgage. This is predatory lending setting up such a borrower for loan default and home foreclosure.

Leave a Reply

Your email address will not be published. Required fields are marked *