Mortgage Rates and Your Credit Score: What You Need to Know for 2023

There are many connections between mortgage rates and credit scores that homebuyers must understand if they want to spend less money. For more information on the ideal credit scores to get best mortgage rates, let’s review current mortgage trends in the United States and how credit scores can influence your payments.

Mortgage Rate Trends in 2022 

In October of 2022, mortgage rates ascended to 5.27% — a high percentage the country hasn’t seen in over a decade. This followed the exceptionally low mortgage rate trend during the pandemic years, meaning that the cost of borrowing money to purchase a home is now higher than it was in recent times. The Federal Reserve raised the interest rate to curb inflation, but at the same time, rising mortgage rates are also making Americans less likely to buy new homes. However, the increased rates haven’t risen to a level that has outright eliminated demand and affordability. In the right circumstances, home buying in this mortgage climate is still a possibility depending on a few factors.

Why You Need a Good Credit Score to Get the Best Mortgage Rates

Having a low-interest rate is essential for saving money in the long run, which is why you should have a good credit score or work toward raising it. Each point on your credit score — no matter how small — can influence how much you’ll have to pay for a mortgage. But with that in mind, why does one require a good credit score to get the best mortgage rates available? 

The answer to this question largely pertains to the lenders lending the money. They want to ensure that they’re leaving their money in the hands of a responsible person who will pay them back on time. They use a person’s credit score as an indicator of how reliable they are. In other words, the higher someone’s credit score is, the more likely that they will be a trustworthy borrower. Conversely, someone with a lower score will be deemed riskier.

As a result, one’s credit score plays a major role in determining their mortgage rates. In fact, there is often a minimum credit score required for an individual to be eligible to apply for a mortgage — although, the required score can vary based on the lender and type of loan, with larger loans commonly needing a higher score. Having too low of a credit score can even lead to a rejected mortgage application.

While obtaining a mortgage is still possible with lower credit scores, you’ll have to contend with higher interest rates. For example, a good credit score to get the best mortgage rates is above 700, with 800 having even better interest rate percentages. Although the difference between a few percentages might not seem very noteworthy at first, it can add up significantly in the long run — falling from 800 to low 700 may lead to you paying more than $14,000 more overall. 

How to Improve Credit Score

Despite the mortgage changes occurring in the United States, you still have a great deal of influence over your credit score. By making the right decisions, you can improve it in several ways and gain better interest rates. One of the easiest ways to improve your score is by paying bills on time, as one’s payment history has a large impact on their overall score. Lowering your credit utilization rate by improving your credit line is another way to raise your score. However, be mindful that waiting too long to improve your score might not be helpful in the long run, as mortgage rates can go up over time. If you already have a high credit score, it’s best to take advantage of it while you still can.

For Help With Mortgage Rates and Credit Scores, Call Us Today

If you need assistance raising your credit score to get better mortgage interest rates, then Quality Credit Repair will be happy to help. As one of the most trusted debt consolidation companies around, we offer guidance on how to restore credit and provide many helpful tips and services. For more information and to schedule your appointment, contact us today.