It is based on a study published by Zillow, a popular real estate website. The study found that when comparing two borrowers with similar financial profiles, but different credit scores, the one with the higher credit score was able to get a lower mortgage rate.
According to Zillow’s analysis of over 40 million mortgage quotes, the average 30 year fixed rate mortgage was 0.8% lower for borrowers with high credit scores than for those with lower credit scores. This means that borrowers with good credit could save a considerable amount of money when borrowing. On a $250,000 mortgage, the difference could mean a savings of nearly $2,000 over the life of the loan.
The study also indicated that the importance of credit scores has increased in recent years. In 2017, credit score accounted for 23.3% of the pricing differences between mortgages, up from just 15.4% in 2011. This suggests that lenders now place greater emphasis on credit scores when assessing applicants’ creditworthiness and are willing to offer better rates as a result.
The article notes that even if a borrower has a low credit score, there are ways to reduce the interest rate. For example, borrowers can try negotiating with the lender or taking out a shorter term loan. Additionally, increasing the size of a down payment can potentially help to offset some of the negative effects of a poor credit score.
In conclusion, the article points out that credit scores are essential when it comes to getting a good mortgage rate. The data provided by Zillow shows that lenders have started placing greater importance on credit scores in recent years and that borrowers with higher credit scores can expect to secure a lower interest rate. There are steps that borrowers with lower credit scores can take to improve their standing and secure a better deal from lenders, but ultimately, those with higher credit scores have the advantage.
This article was contributed on Nov 01, 2023
