Did you know your credit score affects your ability to qualify for a mortgage, and once approved, your monthly mortgage payment amount? So, it only makes sense that our members often have questions about their credit scores.
To help you prepare to apply for a mortgage, we compiled a few popular questions the Elevations Credit Union Mortgage Team hears often, and their answers.
1. Wait, what is a credit score?
It’s a three-digit number that reflects how well you’ve managed your past credit transactions and how you’re doing with your current borrowing. Credit bureaus will look at credit card use, the balance-to-limit rations on credit cards, the mixture of credit cards to non-credit cards, on-time payment history, number of credit inquiries, previous mortgages, the length of credit history and derogatory events (ex., foreclosures and bankruptcies) to determine this number.
Learn more about the importance of having a good credit score, what impacts your score and how to fix credit reporting errors in “The Facts About Your Credit Score.”
2. How do I view my credit score?
While there are many ways to check your credit score, Elevations members can do so through the credit reporting platform, SavvyMoney®*, available on our digital banking platform. On SavvyMoney, your credit score is automatically updated each week. You can view changes and learn more about what makes your credit score change.
Checking your score through a tool like SavvyMoney is called a “soft” inquiry, which means it doesn’t affect your score. However, a “hard” inquiry done through a loan application may.
3. I’m applying for a mortgage loan, but I don’t have any credit. What should I do?
While the best loan options will only be available with a credit score, there may be ways for your mortgage lender to create a credit history from historical payments on rent, utilities and other recurring payments. This is known as non-traditional credit.
Building credit is different for every member, but one recommendation we often give is to get a secured credit card at Elevations. This is a great way to start building credit with a cash deposit that functions as a credit line.
If you’re new to using credit cards, check out “Credit Cards: 5 Ways to Choose and Use Them Wisely” to understand what perks come with cards and how interest works.
4. Can a small change in my credit score make a large difference in my mortgage rate?
A: It depends on whether you’re close to the next credit score tier. Look at the ranges below and determine whether this might affect you:
- Exceptional credit: 780-850
- Very good credit: 740-780
- Good credit: 670-739
- Fair credit: 580-669
- Poor credit: below 579
If you can increase your score so it’s in the next credit score tier, your mortgage rate is going to be better. Generally, with a higher credit score, the lender has lower risk, so you’ll get a lower rate on your mortgage loan.
SavvyMoney, a free credit tool offered in Elevations Digital Banking, offers plenty of resources on how to improve your credit. You can view your score (updated weekly), set a credit score goal, track your progress towards that milestone.
5. I’m hesitant about my credit because I know there’s been some kind of collection on a bill I didn’t pay. What should I do?
This is a frequent question we get, as members ask about a phone bill or medical bill they didn’t know about, or didn’t pay, that has gone to collections. Instead of paying it, they often just let it sit there hoping it will go away. However, the sooner you get the payment taken care of, the sooner your credit will be recaptured, even if you set up payments to get it paid off.
Credit can be forgiving if you take the time to monitor it, correct your issues and then allow time for your credit to be rebuilt. After you’ve been paying debts on time, or paying debts off, you can see a drastic credit score increase within six months to one year.
6. Why is the credit score I got online different from the one your team pulled during my mortgage loan application process?
There are three different credit reporting bureaus with different scoring models. Plus, credit can be different from lender to lender depending on how they pull credit. For instance, when you get a home equity line of credit (HELOC) at Elevations, we pull credit from a certain software version of Experian. Other lenders might choose to pull it in a different version of Experian.
Be aware that your credit score may be higher or lower than you expect when you apply for a loan. One member shared, “I wasn’t going to apply for a car loan because I thought my credit score wasn’t that high through the research and credit monitoring I’d done on my own. But I went ahead and applied, and I found that my credit score was actually much higher than I expected.”
Do you have questions about how your credit score will affect your mortgage application and monthly house payments? Our loan officers are credit score experts. They can evaluate your credit score, answer your questions and provide credit coaching. Contact a member of our Mortgage Team to learn more.
To start taking control of your credit score, access SavvyMoney in Elevations Digital Banking today.
*SavvyMoney is not affiliated with Elevations Credit Union. The Credit Union does not endorse or warrant outside products or services.
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