Having a credit score that is 620 or above is important, because it will allow you to get a better rate on a mortgage or any other loan. Without a credit score above this threshold, it is unlikely that you will get a loan with a reasonable rate and payment plan due to the current restrictions for lenders. A lower credit score will mean you either are turned down for a loan, or that your payments and interest rates will be higher to help offset the risk that the bank is taking. Over the years, many lenders have been increasing the credit score number that they will allow for a mortgage. Some products, known as “subprime loans,” are available to people with a score of 525. However, as the target borrowers carry more risk for the lenders, these loans will have a higher interest rate. Additionally, such loans are likely not going to be available forever. While there are banks whose primary focus is sub-prime loans, and they are not expected to go anywhere currently, the number of loans to people with a score less than 620 is starting to dwindle. What can you do to improve your score? The best way to raise your score is by simply paying your loans ON TIME. This will prove to the bank that you are financially responsible, which will make them more willing to loan you money. If you are thinking that you want to buy a house in a few years, then it is best to start improving your score now. There will be fewer, if any, discrepancies in your report and lenders will be more likely to approve you for a loan, given that everything else is in order. Pay off debt rather than move it around.17 Your debt amount is a reflection of your credit score and moving it around does NOTHING. It is better for you to just pay off any debts you have, which will prove to your bank that you are responsible financially. Having a good credit score is important. It is even more important to maintain a score of 620, so that you are NOT excluded from any loan or mortgage. Manage your credit cards. Don’t run up a high balance, or worse, shut down a credit card to close access to your report. Resolve any discrepancies or errors on your report. You may find that your name is misspelled or an account that is closed, that is still being reported as being open. In short make sure that your report has all accurate information on it. Contributor James Link
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