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A Good Credit Score Can Save You Thousands

Did you know that Fannie Mae now charges a buyer with a 699 credit score an extra 1.5% fee on a home loan compared to a buyer with a 740 credit score? Credit is a huge factor when you’re getting pre approved for buying. Closing costs fees and interest rates can definitely add up quickly so here are some really interesting tips and facts about credit score differences and how you can work to improve your score:

“So how much extra does Fannie Mae and Freddie Mac  charge a buyer for less than perfect credit? Below is a table of Fannie Mae’s Risk Based “Loan Level Price Adjustments” (LLPA’s). This is what lenders use to determine what interest rate a buyer will get on a loan. These LLPA’s take into consideration a buyers credit score and down payment on a home loan scenario.

A borrower with a FICO score between 680-699 who has a 20% down payment, will pay an extra 1.50 point cost on their loan compared to a buyer with a 740 credit score, this is $6,000 on a $400,000 loan. A borrower has two choices how to pay this fee, they can either pay this additional $6,000 as cash as closing, or they will have to take a higher interest rate with the fee built in, which 99% of buyers end up doing.”  Source: Mortgage Market Insider


3 Important Things You Can Do Right Now to Improve your Score:

1. Check Your Credit Report – Credit score repair begins with your credit report. If you haven’t already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau and reporting agency.

2. Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit score. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.


3. Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.

More Tips on How to Fix a Credit Score & Maintain Good Credit:
Payment History Tips

Contributing 35% to your score calculation, this category has the greatest effect on improving your score, but past problems like missed or late payments are not easily fixed.

  • Pay your bills on time: Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO score.
  • If you have missed payments, get current and stay current: The longer you pay your bills on time after being late, the more your FICO score should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report. And good FICO scores weigh any credit problems against the positive information that says you’re managing your credit well.
  • Be aware that paying off a collection account will not remove it from your credit report: It will stay on your report for seven years.
    • If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor: This won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO score.

Source & for more tips on improving your score: MyFico.com

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