A mortgage lender considers your creditworthiness when deciding whether to approve your for a mortgage loan and how much of an interest rate you will pay for that loan. Your creditworthiness has three main parts, your credit history, your income and the loan-to-value ratio of the property.

"Good Credit" means paying your bills on time. Good credit also means that you are not borrowing so much that you are putting yourself at risk for financial problems.

Why is credit important?

Good credit makes it easier to get loans, credit cards, and better interest rates when you borrow. Credit problems, on the other hand, make it harder to get a loan or lower interest rate often when you could use some help the most.
Good Credit = Lower Interest Rates

Any time a lender gives a consumer a loan, line of credit or credit card, there is a risk that the borrower may not repay the loan on time or at all.

Lenders use your credit history, along with information on salary, assets and debts, to predict how much risk is involved with the repayment of the loan. If you are a low risk, your interest rate will be low. If you are a high risk, your interest rate will be higher.

Your Credit history plays an important role in determining your creditworthiness. Having certain types of debt are good for your credit ratings along with how long you have that debt. Your credit history consists of all the inquiries made by creditors when you applied for a certain type of credit. The most popular forms of credit/debt on your report will be Installment debt, Revolving debt and Mortgage Debt.

A credit score is a good snapshot of one's credit picture, but does not necessarily tell the whole story. Lenders want to see a depth of credit as well. This means that you have had some credit tradelines established with timely payments for a specific period of time. Generally speaking, 3-4 tradelines open and used for 24 months show a well established credit history.

For more information, contact Robin Paul at 916-276-4433 or cachebroker@gmail.com for more information.

The main item that lenders look at now-a-days with so much of mortgage lending being so automated is your credit score, also referred to as your fico score. Your payment history, credit usage and everything else in your credit profile will determine what your credit score is. Keep in mind though that lenders don't only look at just your credit score they do look at your entire loan application and documentation as a whole. Just because you have a high credit score does not guarantee that you will be approved for the mortgage you desire and just because you have a low credit score does not mean that you will be declined for the mortgage that you want. For example if you are looking to buy a home with little to no down payment and you have a 600 credit score but you have 300,000 of assets put away somewhere you are more apt to get approved for a mortgage with a better rate than someone with a 640 score and no assets put away.