Know Your Credit Rating

Learn how your credit score can help determine your loan rate.

Your credit score plays a major role in determining the rate that you’ll be able to get on your loan. So, before you apply for your mortgage, make sure your credit reports are accurate and up-to-date. We’ll show you how your credit report is used and highlight some strategies that may help you raise your scores.

Why Your Credit Rating Is So Important

When you apply for your mortgage, your lender will request a credit report.  Lenders put a lot of emphasis on your credit rating, because it helps them determine how likely you are to pay back your loan. If you have a good credit rating, it can help you get better loan options and interest rates.

How Your Credit Score Is CalculatedTo determine your credit score (also called a FICO® score), credit bureaus evaluate your history based on these factors:

Payment History

  • Did you make all your payments for other loans in the past?
  • Did you miss payments?
  • Did you fail to pay back a debt entirely?
  • Have you ever declared bankruptcy or gone into collection?


  • How much credit card debt do you have?
  • Are your credit cards maxed out?
  • Do you have other outstanding loans (like car loans or student loans) and if so, how much do you owe on them?

Length of Credit History

  • Your credit score will take into account how well you’ve been handling credit, and for how many years. It will look at the amount of time that has passed since you opened each credit card or account you have and look at the timeline of activity on the card or account.

Types of Credit

  • Your credit score will take into account how often you apply for new credit and the types of credit you currently use.

What Your Credit Report Contains

Identifying Information
Your credit report includes your name, any aliases, current and previous addresses, your Social Security number, and possibly your marital status. When you review your credit report, make sure that this information is accurate and up-to-date.

Merchant Trade Lines or Credit Lines
These include all regular installment or revolving credit lines, such as department store charge cards, auto loans, mortgages, and credit cards. Your report will show information about each account, including the date you opened the account, your beginning balance, your current balance, and the number and frequency of late payments.

Because not every credit grantor reports to the same credit bureaus, you may not see all of your credit accounts listed on your credit report. For a thorough review of your credit file, be sure to review reports from all three major credit bureaus.

Court Records
Court records include bankruptcies, judgments, satisfied judgments, liens, satisfied liens, and divorce.

Each time you apply for credit and a potential credit grantor looks at your credit file, an “inquiry” appears on at least one of your credit bureau files. Inquiries can also appear when an existing credit grantor reviews your credit periodically (to increase your credit line, etc.), or when you review your own credit report. These requests for your credit report are noted as part of your credit history file and can remain on your report for 24 months.

What’s Not Included in Your Credit Report
Your credit report will not include information about your ethnicity, salary history, religion, checking or savings accounts, stocks and bonds, medical history, or personal assets.

How to Get Your Credit Score
Before you start shopping for a home, you should get a copy of your credit report. Your credit report will be created by one of the major credit reporting agencies:

  • Equifax – 1-800-685-1111
  • Experian – 1-888-397-3742
  • TransUnion – 1-800-888-4213

Review Your Credit History
Credit bureaus record billions of transactions—including yours—every day. Given that huge volume, it’s not surprising that reporting errors can happen.

When you get your credit report, review it carefully. If you see any errors, contact the credit agency and request that it correct the errors before you apply for your loan.

You can also request that the credit bureau send notification of the correction to all the creditors that have received your report in the last six months, including your prospective home financing lender.

Correcting errors in your credit report can help bring up your credit score and may improve your chances of getting approved for a lower loan rate.

By law, you are allowed to check your credit report for free once per year.

How to Check Your Free Credit Score Annually
You can obtain an Annual Credit Report site to get started.

Understand Your Credit Score

Your credit score can range from 300 to 850. Most scores fall between 600 and 700. A higher credit score increases your chances of getting a loan.

A Lower Credit Score Means a Higher Interest Rate
If a lender decides that you’re less likely to pay them back because of a mediocre credit score, they may offer you a loan at a higher interest rate, to make up for the increased risk.

How to Improve Your Credit Score

Unfortunately, there’s no quick fix to improve your credit score. But if you work at it steadily, you can improve your score over time. Here are a few ways to help raise your credit score:

  • Correct any errors you find on your credit report.
    Look for things like incorrectly listed late payments. If you find errors, dispute them with both the credit bureau and reporting agency.
  • Pay all your bills on time every month.
    If you have trouble remembering when bills are due, consider setting up email or text payment reminders with your payees.
  • Reduce the overall amount of debt you owe.
    Create a plan to pay off your highest interest rate debts first while maintaining the minimum payments on your other accounts. You may want to get help from a credit counseling service.
  • Pay at least the minimum on your credit card every month.
    Also, pay more if you can afford to.
  • Don’t go over the credit limit on your credit cards. 
    Try to keep your balance to 25% of your maximum credit limit generally.
  • Make sure you’ve shown a pattern of paying back debts.
    If you’ve never taken out a loan or used a credit card, this could result in a lower score.
  • Keep your credit card accounts open.
    Even if you’re no longer using a credit card, keeping it open can help raise your score. Closed credit card accounts are included on your credit report. So closing an account may actually work against you. Likewise, don’t open a number of new credit cards in an effort to increase your available credit.
  • Avoid other big purchases until you close on your house.

Credit History: One Part of the Big Picture

When you order your credit report, keep in mind that your lender has a sense of proportion. We realize that many people, at one time or another, have had trouble making a payment on time. Late payments should not automatically disqualify you from getting a mortgage. We also understand that many people may find themselves in difficult financial situations due to illness, divorce, temporary unemployment, or other extenuating circumstances.

Although your credit history is important, it’s still just one factor in our decision to approve your mortgage. If you can demonstrate that your credit problem is in the past and you’ve been able to re-establish a good track record, speak to us openly and honestly about your situation. We’re happy to work with you to evaluate your current credit profile and determine what home financing options best suit your particular needs.