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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. As rise sharply and mortgage refinancing volumes plunge, American mortgage borrowers’ are declining a bit. However, most borrowers who qualify for mortgages have near-perfect credit scores. The typical credit score for mortgage borrowers dipped to 776 in the first quarter of 2022, down from 778 in the fourth quarter and just off the first quarter’s record high of 788, the Federal Reserve Bank of New York said in its latest quarterly report. During the era of loose lending that led to the Great Recession, by contrast, the median credit score of mortgage borrowers fell to as low as 707. Meanwhile, only a quarter of borrowers who landed home loans during the winter months had credit scores of less than 723. Just 10 percent had credit scores below 674, according to the New York Fed’s data. In 2020 and 2021, numbers were pushed upward in part by the large share of mortgage refinancings. People who already own homes generally have higher credit scores than first-time buyers — they’ve had more time to build their credit histories, and on-time payments of a mortgage provide a strong boost for a consumer’s credit score. Refinancing grew less attractive as mortgage rates jumped starting in late 2021. As a result, refinance volumes have dropped sharply, the New York Fed says. A symptom of the K-shaped recovery
Americans’ fortunes have diverged widely during the pandemic. Those who could work remotely continued to collect paychecks. Home prices have soared, and stocks reached new records before the recent correction. However, lower-wage workers struggled as restaurants, hotels and other service-sector employers were battered by the pandemic. Economists have invoked the K-shaped recovery to describe the disconnect — affluent Americans’ fortunes are rising like the top half of the letter, while the working classes are experiencing the downward slope of the bottom half of the K. The highest possible credit score in the FICO system is 850. A score higher than 740 is considered . “A FICO score is not an indication of wealth,” says radio host and author Chris Hogan, a personal finance expert. “It’s more of an indication of how you’ve dealt with debt.” Rising scores come with an upside for both lenders and borrowers: A homeowner with a credit score approaching 800 is exceedingly unlikely to default. For borrowers, that means little risk of a financially devastating foreclosure. “If you sign on to buy a home before you’re ready, it can be more of a curse than a blessing,” Hogan says. What you can do about your credit score
Your credit score is the single most important factor in determining your mortgage rate. Here’s how you can boost it — and what to do if your score won’t go any higher: Pay down credit card debt: If you have a choice between tackling debt or scraping together a larger down payment, it’s wiser to focus on the debt, because that should improve your credit score. Pay monthly bills on time: Payment history plays the biggest part in your credit score. To keep from forgetting to write a check, automate your routine payments. To avoid a missed payment, build your . Consider an FHA or VA loan: Compared to backed by Fannie Mae and Freddie Mac, mortgages backed by the and the carry less stringent rules about credit scores. However, the upfront fees are higher. Know when enough is enough: The best mortgage deals go to borrowers with scores above 740, but improvements beyond that point won’t do much to affect your rate. Keep an eye on your score, of course, but understand that boosting it from 790 to 800 won’t get you a better deal. SHARE: Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles