Low Credit Score Can Cost You Dearly
HOME LOANS, TIPS FOR BUYERS
July 8th, 2009
A local mortgage broker from Mission Hills Mortgage detailed how a borrower would be impacted by a 100 point variance in their credit score. Here’s how it goes for a borrower wishing to borrow $160,000 using a 30-year fixed rate mortgage with a FICO score of:
- 720 or better would pay $814/month at 4.875% interest
- Between 675-699 would pay $849/month at 5.25%
- Between 620-674 would pay $885/month at 5.625%
Bottom line: The borrower with the highest credit score would pay about $25,560 less over the life of the loan than the borrower with the worst credit score. Why?
Credit scores translate to the risk for default. Here’s what lenders have found based on credit scores:
- Credit scores below 600 have a 15 to 1 odds of default
- Credit scores between 620-659 have a 32 to 1 chance of default
- Credit scores between 660-679 have a 63 to 1 chance of default
- Credit scores between 680-699 have a 89 to 1 chance of default
- Credit scores between 700-719 have a 134 to 1 chance of default
- Credit scores between 720-759 have a 189 to 1 chance of default
- Credit scores between 760-799 have a 1365 to 1 chance of default
- Credit scores over 800 have a 1485 to 1 chance of default
Home buyers should monitor their credit scores and work to raise the score by paying bills on time, limiting the amount borrowed on credit lines and not closing credit accounts with good payment histories.
Lenders are scrutinizing borrowers more closely now that the days of easy credit are gone. Search my previous posts for more ideas on improving your credit score.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
