How does my credit score affect my mortgage rate?
Credit can affect both the options available to you and the price of borrowing.
Your credit score can affect the mortgage interest rate and loan terms you are offered.
In general, stronger credit can make a borrower eligible for more favorable pricing, while lower credit can contribute to higher borrowing costs or fewer available options.
However, the mortgage rate you receive is not determined by credit score alone.
Why credit can change the price of a mortgage
Lenders use credit information as part of evaluating repayment risk.
Credit scores summarize information from a credit report into a numerical measure.
A stronger credit history can reduce perceived lending risk, while missed payments, high balances or other negative information may affect pricing or eligibility.
Your mortgage rate is not based on credit alone
Loan pricing can also depend on factors such as the loan program, down payment, loan amount, property type, market interest rates, points and other characteristics.
That means two people with different credit scores will not necessarily receive rates that differ by a predictable fixed amount.
Small rate differences can matter
On the same loan amount and term, a higher interest rate generally produces a higher principal-and-interest payment and more interest expense over time.
The exact difference depends on the loan amount, term, rate and how long the borrower keeps the loan.
Check your reports before you apply
Credit-report errors can affect a score.
Reviewing credit information early gives a consumer time to dispute inaccurate information through the appropriate channels before getting deep into the mortgage process.
Consumers should also be cautious about unnecessarily taking on new credit shortly before or during a mortgage application.
Compare the actual offers you receive
Once real mortgage offers are available, do not compare them based on rate alone.
Points, lender credits, fees, mortgage insurance, cash to close and other terms can change the economics of the transaction.
Use the official Loan Estimates to organize and compare the complete offers, and ask a qualified mortgage professional to explain differences you do not understand.