Released: July 03, 2007

Good credit score helps your mortgage rate

Source: Sandra Block, USA Today

Sales of existing homes fell to a four-year low last month, and the supply of homes for sale was up, which is happy news for house hunters. But unless you’re sitting on a mountain of cash, you’ll need a mortgage, and that’s no longer a sure thing. In response to a sharp rise in foreclosures, mortgage lenders have tightened their standards, leading to an increase in rejected applications.

In addition, interest rates have been rising in recent weeks, so even if you qualify for a mortgage, you’ll probably pay more for it. That means it’s more important than ever to make sure your credit score is in good shape. A credit score is a mathematical model that analyzes information in your credit report. Lenders use credit scores to gauge the likelihood that you’ll repay your debts. A good credit score can save you thousands of dollars in interest over the life of your loan (see box).

If you plan to buy a home within a few months, here are steps you can take to improve your score:

• Order all three of your credit reports and your scores from www.annualcreditreport.com. You’re entitled to one free credit report every year from each of the three credit reporting agencies.

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