The Answer is Yes, and it Could be Thousands
Jan and Bill are getting ready to buy a home. They have visited the real estate sites and the mortgage sites, and they think they have a pretty good idea of how much house they can afford. But this young couple will face a rude awakening. They haven’t checked their credit score. That credit score can clearly disqualify them from any loan, but that isn’t the issue here. The issue for Jan and Bill is that their “good,” not “excellent” credit score is going to up their interest rate by .5%. On a $400,000 loan they will pay $200 more per month or $2,400 per year.
And it isn’t just mortgages, but every product you buy on credit is effected by your credit score. A few points can mean you don’t qualify for that interest free 18-month credit card or the 12% credit card. Those same few points might up your car payment by $1000 a year. There are many steps you can use to help get your credit score up to excellent. But a tool that we have recommended before has just added a great new feature that could help you get there.
We are not paid to say this in any way. CreditKarma.com gets our vote for online credit help companies. There really is no cost to join or even pressure to pay them any money. They make their money by recommending credit resources to you based on your circumstances. Their scoring method is easy to read and understand, and they will take you step by step through your credit history to see why you are rating the way you are, including recommending ways you can improve your score.
If you agree to receive emails from them, they will periodically send you an update to let you know if your score has changed. Recently I opened a new credit card and maxed out another one. My credit score dropped a few points. By paying off a chunk of the one that was maxed out, my credit score went back to the higher number.
Now they have added a credit score simulator. Let’s say you are thinking about getting a new loan. You can follow a few simple steps and CreditKarma.com will show you the effect that loan will have on your score. Maybe you want to raise your credit score. You can show the effects of reducing your credit obligations. Creditkarma points out that this is merely a simulation and that there is no guarantee that you will get the exact results.
Even after you have used a service like CreditKarma.com, you need to take the additional step of actually contacting a mortgage broker or lender. The mortgage industry uses a slightly different credit measuring process that gives more weight to how you have handled mortgage payments in the past. Additionally, a good mortgage broker can help you quickly determine what other factors might help you get the lowest interest rate, and the best possible deal.
Once you optimize your credit score, the mortgage broker can help you with a loan preauthorization letter. In LA’s hot real estate market, you are at a huge disadvantage in any negotiation if you don’t have proof of your ability to fund your bid price. For help with your mortgage turn to mortgage broker and Lender Bill Rayman at GuaranteedRate.com/billrayman. (424) 354-5325