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Credit Score: Factor For High Mortgage Interest Rates

Jun 24, 2008
Bad credit can intensify the difficulty that a homeowner encounters when seeking a home equity line of credit. Bad credit can be the reason for a poor credit score. It can be a big factor when you are denied in applying personal loans. And if ever you are able to avail for personal loans, you will still encounter problems like high mortgage interest rates.

So, what is a credit score, by the way? The credit score ranges between the values of 300 and 850. The credit score is developed by the Fair Isaac Corporation. Lenders who arrange for a home equity line of credit utilize the credit score in order to set the interest rate that will be imposed to the homeowner.

Homeowners with a low credit score will need to pay higher interest payments like mortgage interest rates. A score above 700 assures good interest rates. The credit score also serves as an indicator of whether a lender should accept or deny a homeowner's application for credit. Decisions on credit limits for the homeowner are also based on the homeowner's credit score.

The credit score is a function of the homeowner's history of credit. In the U.S., three different agencies keep a record of every consumer's line of credit. Those firms are Experian, TransUnion and Equifax. If a homeowner with a low credit score wants to raise that score, then the homeowner must contact each of those three agencies because these companies determine your credit rating and provide necessary ideas on how can you elevate your credit rating..

The effort to overcome a record of bad credit rating and to raise a credit score needs the contesting of false claims that money is owed. If the homeowner can provide proof that the claim for money is spurious then the homeowner has an chance to raise his credit score. This action should be taken if the homeowner who tends to seek a home equity line of credit has a score less than 640. Such a score would be a sign of bad credit.

The contesting of a credit rating is not like a shot in the dark. A survey of credit reports in the U.S. showed that 80% of such reports contained errors. Thus, a homeowner could have good reason to question the credit score that is being utilized to know the interest rate on a home equity line of credit.

The credit rating for a couple, a pair that are joint homeowners, is dependent on three credit scores from the person with the most sizable income. This is the score that the homeowner needs to make correction. Such correction may needs a written statement to each of the above-mentioned agencies. Those agencies will then contact the homeowner and tell if more information is necessary. If the homeowner is lucky, then the credit score will be elevated and the interest rate for the desired home equity line of credit will be lowered.

Once the homeowner has a good credit rating then he will want to avoid slipping back into that region of bad credit. This implies that the homeowners must avoid the sort of spending that carries them to the borders of their credit limits.
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