Your credit score is one of the most important factors in determining whether or not you get approved for a mortgage. Lenders need to trust that you will be able to make your monthly payments regularly and on time. Your mortgage depends on your credit score.
The FICO Score
The most common credit score that you will see is the FICO score, which is calculated through your payment history, the amount of money that you owe, length of your credit history, and new credit.
Your Credit Determines Your Interest Rate
Your credit score affects the interest rate on your mortgage. If your credit score is high, you will have a lower interest rate. While one percent may not seem like much of a difference, you can end up paying almost $50,000 more in the long run. It helps to obtain a free credit report and take the time to fix any mistakes. Do this before applying for a mortgage to try and maintain a solid fixed interest rate. A little goes a long way.
The Higher the Better
Lenders will typically favor higher credit scores. If your credit runs below 400, your chances of getting a mortgage is slim to none. While there is no official minimum credit score to obtain a mortgage, the higher the number, the more willing companies are to open their doors for you.