Credit Repair Can Save You Thousands of Dollars
For many people, the process of delaying the purchase of a home over a period of six or so months could actually help them to save thousands of dollars over the lifetime of the loan. Your circumstances are unique. There is no doubt that you will find yourself making this decision based on your needs right now, but consider a few important facts before you make the decision to buy just yet.
Why should you repair your credit before applying for a mortgage?
If you can boost your credit score from good to excellent, or from average up, you could find yourself in the position to pay far less for your mortgage. That is because lenders are willing to lend to individuals based on what amount of risk they are. For example, if you have a poor credit score, you could end up paying a 1/2 or a 1/3 more in interest than someone else with good credit. This means thousands of dollars over the lifetime of that loan. Lenders see those with a lower score as more of a risk.
Look at the following chart. This chart can help to show you how much you could pay.
First, notice that individuals who wish to purchase this home with a poor credit score are unlikely to qualify for a short-term loan. Even long-term loans can be hard to get into. Next, notice the difference in the interest rates you will pay for the loans you want based on the term length and the overall credit you have. Now, consider the actual cost of interest on these loans.
Below are a few figures that show what the cost of interest is on these types of loans. This should help emphasize the actual cost of having bad credit. Keep in mind that this is just the interest on these loans, assuming you are borrowing $250,000.
- 30 year mortgage with poor credit with an interest rate of 4.87 percent – you pay $226,287.40 in interest
- 30-year mortgage with excellent credit with an interest rate of 4.0 percent – $179,973.77 in interest.
A small difference in interest rates does make a big difference in your ability to pay for your loan. That is thousands of dollars more than you would pay.
How to get lower interest on your mortgage
How can you save like this? It starts by knowing what is on your credit report. Then, consider the following.
- Get credit repair to remove any errors on your credit report that could be hurting your credit score in the long term. Be sure all information is accurate.
- Work to improve your credit scores by reducing what you owe and paying lenders on time.
- Do not open new lines of credit or make numerous credit inquiries.
By working to repair your credit, you could see yourself with a savings of tens of thousands of dollars. For most people, it is well worth waiting six months to boost your score if it needs it.
Speak with a professional about repairing your credit.
It is one thing to have bad credit in today’s wo ...
› read more
and get weekly money-savings tips!