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.