Many of you might have questions about what is a credit score and how it affects your monthly mortgage payments. A credit score is a number that ranges 300 to 850 and represents a picture about an individual’s credit risk, or the likelihood that the individual will pay his or her obligations on time.
Credit score ranges are:
- 300-579: Poor.
- 580-669: Fair.
- 670-739: Good.
- 740-799: Very good.
- 800-850: Excellent.
If you don’t know your credit score, you can check it here.
Your credit score is directly related to your mortgage interest rate as shown in the graph below.
As a consequence of the relationship between credit score and mortgage interest rate, your credit score can significantly impact your monthly mortgage payments and the total interest paid as shown in the table below.
Having an excellent credit score can save you $93,683 USD ($213,929 – $120,246) in interest payments over the 30-year period which can help you have a better retirement or help your kids pay for college education.
If you are planning to get a mortgage, we recommend that you check your credit score and in case you have bad credit, try improving it before getting a mortgage.